OBJECTIVES: To describe the functional difficulties of children with special health needs and to demonstrate the shared and unique contributions in predicting health outcomes and informing therapeutic interventions, policies, and research by using data from the 2005-2006 National Survey of Children With Special Health Care Needs. RESULTS: Children with special health care needs experience an array of health conditions and functional difficulties that are interrelated. Although health conditions tend not to change, the characteristics of functional difficulties are subject to changes over time with age or as a result of interventions. Descriptive data highlight common functional difficulties across health conditions. Multiple regression analyses support both health conditions and functional difficulties predicting (1) health services, such as emergency department visits, (2) personal limitations such as impairment of daily activities and school absences, and (3) family impact, stopping or reducing work. Functional difficulties were, however, the stronger predictor for all outcomes except school absences. CONCLUSIONS: The results support the utility of expanding measures of children with special health care needs to include functional difficulties in survey research, as well as clinical and public health practice. Systematic inclusion of functional difficulties will inform policy development, program planning, outcome assessment, and resource allocation for this vulnerable population. A focus on functional difficulties facilitates stronger coordination of services across sectors including physical health, mental health, education, and other social services to improve the health and well-being for these children and youth. Pediatrics 2012; 129: e714-e722