Aim This study aimed at analyzing the effect of quality of life ( QoL ) on mortality in older adults with dementia living in long‐term care facilities. Methods A prospective observational cohort study was carried out on 412 residents aged older than 60 years, diagnosed with dementia according to the D iagnostic and S tatistical M anual of M ental D isorders, fourth edition. Besides assessment of QoL ( EQ‐5D index by proxy) and perceived health status ( EQ‐VAS ), baseline measurements included severity of dementia ( C linical D ementia R ating S cale [ CDR ]), comorbidity (number of self‐reported chronic conditions), disability evaluation ( B arthel Index), cognitive state ( Mini Examen Cognoscitivo , a validated and modified S panish version of the M ini‐ M ental S tate E xamination) and depression ( C ornell D epression S cale for D ementia). Sociodemographic and clinical variables were analyzed as potential effect modifiers and confounders in the relationship between QoL and mortality using a multivariate logistic regression analysis. Results After an 18‐month follow up, 138 residents had died. Adjusting for CDR and B arthel Index, the odds of mortality were multiplied by 0.25 (95% CI 0.09–0.70) and 0.79 (95% CI 0.26–2.42) for every unit of change in the EQ‐5D index in the residents with C ornell score <6 and ≥6, respectively. Conclusion The present study suggests that the effect of QoL on mortality in institutionalized adults with dementia should take into account the presence or absence of depression. In addition, residents with a greater disability and more advanced dementia should be a target for interventions in rehabilitation care. Geriatr Gerontol Int 2015; 15: 38–44.