Age-related declines in functional and cognitive abilities present significant challenges to older adults' independence and quality of life. This dissertation investigates these challenges through a series of studies using digital environments to understand and support older adults' functional abilities, cognitive health, and wellbeing.A systematic review and meta-analysis found large age differences in both navigational performance and spatial learning, with substantial heterogeneity across studies, and suggested experimental environment (virtual vs. real-world) as a potential moderator of the observed differences. An empirical real-world wayfinding study confirmed that older adults took longer and traveled farther to reach destinations but also revealed compensatory behaviors such as increased reliance on signage. These findings underscore the importance of ecological valid in this area and suggest that older adults actively employ strategies to mitigate their navigational difficulties. Building on these findings, a randomized controlled trial provided preliminary evidence that virtual reality navigational training is feasible with older adults and can improve wayfinding performance, particularly when combined with repeated spatial exposure. A separate qualitative multi-site study examined VR as a platform for social engagement, finding that environments encouraging personal storytelling and shared experiences were more effective at fostering meaningful social connections than task-oriented content alone. Finally, two study protocols are proposed to extend these findings toward broader impact: one using spatial navigation assessment for early detection of cognitive impairment, and another proposing a gaming experience tracking and recommendation platform for improving daily functioning and quality of life. Collectively, this dissertation contributes to understanding age-related functional decline, provides evidence for the potential of digital environments to support older adults, and outlines directions for leveraging these technologies at a broader scale.