A multifunctional rear camera system includes a rear camera and a processor. Responsive to processing of captured image data, the processor generates respective outputs for (i) a rear backup assist function, (ii) a mirror dimming control for at least an electro-optic interior rearview mirror assembly of the vehicle and (iii) ambient light detection. The processor processes a mirror zone of captured image data for mirror dimming control and processes upper corner regions of captured image data for ambient light detection. The processor processes at least lower regions of captured image data for the rear backup assist function. The generated output for the mirror dimming control is provided to the electro-optic interior rearview mirror assembly to control dimming of the electro-optic reflective element. The generated output for the rear backup assist function provides (i) object detection and/or (ii) video display of video images derived from captured image data.