Summary: This study evaluates the prevalence of sarcopenia among older people admitted to a rehabilitation unit after hip fracture and the association between sarcopenia and functional outcomes. The results show that sarcopenia had a negative impact on functional recovery. The assessment of sarcopenia among older adults receiving rehabilitation programs is crucial. Introduction: Sarcopenia is a highly prevalent geriatric syndrome associated with adverse outcomes, including falls, disability, institutionalization, and mortality. Few studies assessed sarcopenia among older adults receiving rehabilitation programs. Methods: Patients aged 70 years or more consecutively admitted to in-hospital rehabilitation programs that had suffered from hip fracture entered the study. Sarcopenia was defined according to the Foundation for National Institutes of Health (FNIH) criteria. Multivariable linear regression models were used to analyze the association between the sarcopenia and functional recovery. Results: The recruited population was composed of 127 patients, with a mean age of 81.3 ± 4.8 years, predominantly females (64.6%). Using the criteria proposed by the FNIH, patients with a diagnosis of sarcopenia were 43 (33.9%). After adjustment for potential confounders, participants with sarcopenia had a significant increased risk of incomplete functional recovery compared with non-sarcopenic patients (OR 3.07, 95% CI 1.07–8.75). Compared with participants without sarcopenia, those with sarcopenia showed lower Barthel index scores at the time of discharge from the rehabilitation unit (69.2 versus 58.9, respectively; p < 0.001) and after 3 months of follow-up (90.9 versus 80.5, respectively; p = 0.02). Conclusions: These findings support the systematic assessment of sarcopenia among older adults receiving rehabilitation programs to assist in the development of personalized treatment plans aimed at improving functional outcomes.