Resumen: Background: Reduction in intrinsic foot muscle strength may impair physical performance and increase the risk of falls. Aim: The aim of this study is to analyze the relationship between hallux flexion strength, assessed through the PGT, for physical performance and fall risk in Chilean older adults. Methods: A cross-sectional, descriptive–correlational study was conducted with 188 community-dwelling older adults (89.3% women). Participants’ sociodemographic and anthropometric information was also collected. Hallux plantar flexion strength was assessed using the Paper Grip Test (PGT). Physical performance was evaluated with the Short Physical Performance Battery (SPPB), and fall risk was assessed using the Timed Up and Go (TUG) and Single-Leg Stance Test (SLS). Pearson’s correlation coefficients were calculated for the overall sample, as well as separately for sex. Results: Significant positive correlations were observed between PGT and the total SPPB score for both the right foot (r = 0.178; p = 0.008) and the left foot (r = 0.175; p = 0.009). Additionally, moderate correlations were found between PGT and SLS time (right r = 0.316; p < 0.001; left r = 0.397; p < 0.001), and an inverse correlation was observed between PGT and TUG execution time (right r = −0.372; p < 0.001; left r = −0.393; p < 0.001). Regression models showed that TUG and SLS significantly predicted PGT performance, explaining 17% (R2 = 0.17) and 20% (R2 = 0.20) of the variance for the right and left foot, respectively. Conclusions: Hallux plantar flexion strength is significantly associated with physical performance and fall risk. The simplicity, low cost, and clinical utility of the PGT support its use as a screening tool for early detection of functional decline.