Lung transplantation aims to improve health-related quality of life (HRQL) and survival. While lung function improvements are associated with these outcomes, the association between physical functioning and these outcomes is less clear. We investigated the association between changes in patient-reported physical functioning and HRQL, chronic lung allograft dysfunction (CLAD), and survival after lung transplantation. This single-center prospective cohort study analyzed 220 lung transplant recipients who completed the 15-item Lung Transplant Valued Life Activities (LT-VLA) before and repeatedly after transplant. HRQL was assessed using generic, respiratory disease-specific, and utility measures. Associations between 0.3-point changes (the minimally important difference) in LT-VLA as a time-varying predictor on HRQL, CLAD, and mortality were tested using linear regression and Cox proportional hazard models. Models were adjusted for demographics, disease diagnosis, and post-operative lung function as a time-varying covariate. Participants were 45% female and 75% White, with a mean age of 56 (±12) years. Each 0.3-point improvement in LT-VLA was associated with substantially improved HRQL across all measures (adjusted p-values <0.01). Each 0.3-point improvement in LT-VLA was associated with a 13% reduced hazard of CLAD (adjusted HR: 0.87, 95% CI: 0.76-0.99, p=0.03) and a 19% reduced hazard of mortality (adjusted HR: 0.81, 95% CI: 0.67-0.95, p=0.01). Improvements in patient-reported physical functioning after lung transplantation are associated with improved HRQL and reduced risk of CLAD and death, independent of allograft function. The simplicity of the LT-VLA suggests it could be a valuable monitoring or outcome measure in both clinical and research settings.