Sleep quality and physical activity (PA) appear to be interrelated; thus, by promoting one behaviour, it may be possible to improve the other in older adults. Examination of the within‐person day‐to‐day variation in PA and sleep quality could potentially elucidate the directionality of the association of these behaviours. We measured sleep quality (i.e. fragmentation, efficiency, duration and latency) and moderate‐to‐vigorous PA using the MotionWatch8© over 14 consecutive days and nights in community‐dwelling adults (n = 152; age range 53–101 years). Multilevel modelling estimated within‐subject autoregressive and cross‐lagged effects and between‐subject associations between PA and sleep quality. On days when individuals engaged in a high amount of PA on one day (relative to their averages), they were more likely to engage in a high amount of PA on the next day (estimate, 0.19; 95% CI, 0.14, 0.24). Nights in which individuals had a long sleep latency were followed by nights in which they also had a long sleep latency (estimate, 0.09; 95% CI, 0.03, 0.14). In contrast, nights in which individuals slept for a long period of time were followed by nights in which they slept relatively less than their averages (estimate, −0.09; 95% CI, −0.13, −0.04). When individuals engaged in a large amount of PA during the day, they tended to sleep longer that following night (estimate, 0.01; 95% CI, 0.001, 0.02). All other associations between PA and sleep quality were not significant. Increasing PA therefore might increase sleep duration in older adults.