Background: Idiopathic pulmonary fibrosis (IPF) is a progressive and fatal fibrosing lung disease of unknown cause. The advent of anti-fibrotic medications known to slow disease progression has revolutionised IPF management in recent years. However, little is known about the natural history of IPF patients with mild physiological impairment. We aimed to assess the natural history of these patients using data from the Australian IPF Registry (AIPFR). Methods: Using our cohort of real-world IPF patients, we compared FVC criteria for mild physiological impairment (FVC ≥ 80%) against other proposed criteria: DLco ≥ 55%; CPI ≤40 and GAP stage 1 with regards agreement in classification and relationship with disease outcomes. Within the mild cohort (FVC ≥ 80%), we also explored markers associated with poorer prognosis at 12 months. Results: Of the 416 AIPFR patients (mean age 70.4 years, 70% male), 216 (52%) were classified as 'mild' using FVC ≥ 80%. There was only modest agreement between FVC and DLco (k = 0.30), with better agreement with GAP (k = 0.50) and CPI (k = 0.48). Patients who were mild had longer survival, regardless of how mild physiologic impairment was defined. There was, however, no difference in the annual decline in FVC% predicted between mild and moderate-severe groups (for all proposed criteria). For patients with mild impairment (n = 216, FVC ≥ 80%), the strongest predictor of outcomes at 12 months was oxygen desaturation on a 6 min walk test. Conclusion: IPF patients with mild physiological impairment have better survival than patients with moderate-severe disease. Their overall rate of disease progression however, is comparable, suggesting that they are simply at different points in the natural history of IPF disease.