We have studied the effect of shortening of the femoral neck and varus collapse on the functional capacity and quality of life of patients who had undergone fixation of an isolated intracapsular fracture of the hip with cancellous screws. After screening 660 patients at four university medical centres, 70 patients with a mean age of 71 years (20 to 90) met the inclusion criteria. Overall, 66% (46 of 70) of the fractures healed with > 5 mm of shortening and 39% (27 of 70) with > 5° of varus. Patients with severe shortening of the femoral neck had significantly lower short form-36 questionnaire (SF-36) physical functioning scores (no/mild (<5 mm) vs severe shortening (> 10 mm); 74 vs 42 points, p < 0.001). A similar effect was noted with moderate shortening, suggesting a gradient effect (no/mild (< 5 mm) vs moderate shortening (5 to 10 mm); 74 vs 53 points, p = 0.011). Varus collapse correlated moderately with the occurrence of shortening (r = 0.66, p < 0.001). Shortening also resulted in a significantly lower EuroQol questionnaire (EQ5D) index scores (p = 0.05). In a regression analysis shortening of the femoral neck was the only significant variable predictive of a low SF-36 physical functioning score (p < 0.001).