The association between higher New York Heart Association (NYHA) functional class and poor outcome in heart failure (HF) is well known. However, to what extent these associations are confounded by covariates such as age, the severity of disease, and co-morbidity burden is unknown. In the Digitalis Investigation Group (DIG) trial, 2,441 of the 7,788 patients with chronic HF had NYHA class III or IV symptoms. Propensity scores for NYHA classes III and IV were calculated for each patient and were then used to match 1,863 patients in NYHA classes III and IV with 1,863 patients in NYHA classes I and II. Kaplan-Meier and matched Cox regression analyses were used to estimate associations of NYHA class III or IV with mortality and hospitalizations during a median of 37 months of follow-up. Compared with 34% (641 of 1,863) patients in NYHA classes I and II (mortality rate 1,175 in 10,000 person-years of follow-up), 42% (777 of 1,863) patients in NYHA classes III and IV (mortality rate 1,505 in 10,000 person-years) died from all causes (hazard ratio 1.29, 95% confidence interval [CI] 1.14 to 1.45, p <0.0001). Hospitalizations due to all causes occurred in 66% (1,232 of 1,863) patients in NYHA classes I and II (hospitalization rate 3,898 in 10,000 person-years) and 71% (1,322 of 1,863) patients in NYHA classes III and IV (hospitalization rate 4,793 in 10,000 person-years) (hazard ratio 1.16, 95% CI 1.05 to 1.28, p = 0.003). The hazard ratios for patients in NYHA classes III and IV, compared with those for those in NYHA classes I and II, for other outcomes were 1.29 for cardiovascular mortality (95% CI 1.12 to 1.48, p <0.0001), 1.49 for HF mortality (95% CI 1.20 to 1.84, p <0.0001), 1.18 for cardiovascular hospitalization (95% CI 1.06 to 1.32, p = 0.002), and 1.17 for HF hospitalization (95% CI 1.03 to 1.34, p = 0.017). In conclusion, baseline NYHA class is a marker of hospitalization, disease progression, and mortality in a wide spectrum of ambulatory patients with chronic HF. © 2007 Elsevier Inc. All rights reserved.