Variability in kinematic and spatio-temporal gait parameters has long been equated with stability and used to differentiate fallers from non-fallers. Recently, a mathematically rigorous measure of local dynamic stability has been proposed based on the non-linear dynamics theory to differentiate fallers from non-fallers. This study investigated whether the assessment of local dynamic stability can identify fall-prone elderly individuals who were unable to successfully avoid slip-induced falls. Five healthy young, four healthy elderly and four fall-prone elderly individuals participated in a walking experiment. Local dynamic stability was quantified by the maximum Lyapunov exponent. The fall-prone elderly were found to exhibit significantly lower local dynamic stability (i.e. greater sensitivity to local perturbations), as compared to their healthy counterparts. In addition to providing evidence that the increased falls of the elderly may be due to the inability to attenuate/control stride-to-stride disturbances during locomotion, the current study proposed the opportunity of using local dynamic stability as a potential indicator of risk of falling. Early identification of individuals with a higher risk of falling is important for effective fall prevention. The findings from this study suggest that local dynamic stability may be used as a potential fall predictor to differentiate fall-prone adults.