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Background: Low and middle-income countries (LMICs) such as Mexico are experiencing rapid population aging, accompanied by increasing levels of functional dependency and growing long-term care (LTC) needs. Objectives: We aimed to identify the factors associated with varying levels of functional dependency in order to assist population health planning and LTC policy in aging populations in Mexico. Methods: This cross-sectional study analyzed data from the 2021 wave of the Mexican Health and Aging Study (MHAS). Functional dependency was assessed through a modified Autonomie Gérontologie Groupes Iso-Ressources (AGGIR) scale, adapted to incorporate cognitive and physical assessments suitable for the Mexican context. Socioeconomic, health-related, and psychological variables were examined using ordinal logistic regression models. Results: Among 8049 participants included in the analysis, 87.08% were classified with non-to-mild dependency, 9.13% with moderate dependency, and 3.79% with severe dependency. More severe levels of functional dependency were associated with older age, lower educational attainment, not having a partner (being single, widowed, separated or divorced), and the presence of chronic conditions such as hypertension and cardiovascular disease. Conclusions: In contrast, higher educational attainment and regular physical activity were associated with less severe levels of dependency. These associations highlight the multifactorial nature of dependency in later life. The application of a graded, multidimensional dependency classification provides a more comprehensive and differentiated understanding of care needs than binary functional measures. This population-level perspective may support the prioritization of healthy aging strategies and long-term care planning in rapidly aging middle-income settings such as Mexico. Full article