Background: The population of Palestine comprises almost 200 000 Palestinians aged 60 or older. The purpose of the study was to estimate disability-free life expectancy for Palestinians living in the West Bank and Gaza Strip and to evaluate changes from 2006 to 2010. Methods: The study combined mortality data and prevalence of activity limitation derived from the Palestinian Family Health Surveys carried out in 2006 and 2010. Based on questions about the ability to perform five basic daily activities, disability-free life expectancy was estimated. Changes between 2006 and 2010 were decomposed into contributions from changes in mortality and disability. Results: Life expectancy at age 60 increased from 17.1 years in 2006 to 17.3 years in 2010 for men and from 18.7 years to 19.0 years for women. Disability-free life expectancy increased significantly, by 1.3 years for 60-year-old men (from 12.8 years to 14.1 years) and 1.8 years for 60-year-old women (from 12.6 years to 14.4 years). This increase was seen in the Gaza Strip as well as in the West Bank. While the modest contribution of the mortality effect did not differ between gender and regions, the strong contributions from the disability effects varied, being greatest for women in the Gaza Strip. Conclusion: The significant increase in disability-free life expectancy for both genders is remarkable and, to our knowledge, not seen in other low-income countries. This change may be due to decreasing incidence of disability and greater recovery from disability as a result of better prevention, care and rehabilitation of chronic diseases.