To validate a laboratory-based driving simulator in measuring on-road driving performance, 129 older adult drivers were assessed with both the simulator and an on-road test. The driving performance of the participants was gauged by appropriate and reliable age-specific assessment criteria, which were found to be negatively correlated with age. Using principal component analysis, two performance indices were developed from the criteria to represent the overall performance in simulated driving and the on-road assessment. There was significant positive association between the two indices, with the simulated driving performance index explaining over two-thirds of the variability of the on-road driving performance index, after adjustment for age and gender of the drivers. The results supported the validity of the driving simulator and it is a safer and more economical method than the on-road testing to assess the driving performance of older adult drivers.