The ability to perform multiple tasks simultaneously has become increasingly important as technologies such as cell phones and portable music players have become more common. In the current study, we examined dual-task costs in older and younger adults using a simulated street crossing task constructed in an immersive virtual environment with an integrated treadmill so that participants could walk as they would in the real world. Participants were asked to cross simulated streets of varying difficulty while either undistracted, listening to music, or conversing on a cell phone. Older adults were more vulnerable to dual-task impairments than younger adults when the crossing task was difficult; dual-task costs were largely absent in the younger adult group. Performance costs in older adults were primarily reflected in timeout rates. When conversing on a cell phone, older adults were less likely to complete their crossing compared with when listening to music or undistracted. Analysis of time spent next to the street prior to each crossing, where participants were presumably analyzing traffic patterns and making decisions regarding when to cross, revealed that older adults took longer than younger adults to initiate their crossing, and that this difference was exacerbated during cell phone conversation, suggesting impairments in cognitive planning processes. Our data suggest that multitasking costs may be particularly dangerous for older adults even during everyday activities such as crossing the street.