Cognitive and physical decline are important predictors of functional independence in Alzheimer's disease (AD). However, little is known about AD-related neural change leading to decreased independence. We hypothesized that regional gray matter atrophy, including the medial frontal cortex, would be related to cognition, physical function, and functional independence. Individuals without dementia (n=56) and subjects with early-stage AD (n=58) underwent MRI and a comprehensive cognitive and physical function evaluation. The relationship of cognitive and physical function measures and independence performing complex daily activities was explored using correlation and mediation analysis. These results suggest that cognition had both a strong direct effect and mediated the influence of physical function on independence for those with AD. We followed this with a voxel-based morphometric global conjunction analysis of imaging data within each group to identify neural substrates common to our function measures. Imaging evidence supported our mediation analysis results. Imaging evidence revealed that in AD, regional gray matter atrophy measures in medial frontal and temporo-parietal areas were related to decreased cognition, physical function, and independence. Loss of independence in early AD is closely related to impaired cognition associated with performing complex behaviors. People with early AD may have decreased gray matter volume in the medial frontal and temporal-parietal cortices that is associated with loss of independence in activities of daily living. These results are the first to identify regionally specific brain volume changes that may be related to functional dependence seen in early AD.