Purpose: The purpose of this study was to examine the effects of a Tai Chi exercise program on physical function and physiological variables in patients with degenerative arthritis. Methods: The study utilized a nonequivalent control group with pretest-posttest design. Data collection was done with the elders from two welfare institutions in C-city between July I and September 22, 2007. The participants were assigned either to an experimental group (n=24) or to a control group (n=22). The experimental group participated in Tai Chi exercise for 60 minutes per session, twice a week for 12 weeks and the control group received the education about arthritis for 3 weeks. Results: Except for $VO_2max$, weight, and body fat rate, the elders in the experimental group showed significant improvement in physical function (grip strength, flexibility, balance), and physiological variables (BP) compared to the control group. Conclusion: The results suggest that Tai Chi exercise would partially improve physical function, and physiological variables. Further studies are needed to determine the effects on physical fitness and physiological variables after Tai Chi exercise in this population.