Little is known about small-area variation in healthy longevity of older people and its socioeconomic correlates. This study aimed to estimate health expectancy at 65 years (HE65) at the municipal level in Japan, and to examine its relation to area socio-demographic conditions. HE65 of municipalities (N = 3361) across Japan was estimated by a linear regression formula with life expectancy at 65 years and the prevalence of those certificated as needing nursing care. The relation between HE65 and area socio-demographic indicators was examined using correlation coefficients. The estimated HE65 (years) ranged from 13.13 to 17.39 for men and from 14.84 to 20.53 for women. HE65 was significantly positively correlated with the proportion of elderly and per capita income, and negatively correlated with the percentage of households of a single elderly person, divorce rate, and unemployment rate. These relations were stronger in large municipalities (with a population of more than 100,000) than in small and medium-size municipalities. A decrease in healthy longevity of older people was associated with a higher percentage of households of a single elderly person and divorce rate, and lower socioeconomic conditions. This study suggests that older people in urban areas are susceptible to socio-demographic factors, and a social support network for older people living in socioeconomically disadvantaged conditions should be encouraged.