Aim Urinary tract infections (UTI) represent a common perioperative complication among elderly patients with hip fracture. To determine the impact of UTI on the perioperative course of elderly patients with hip fractures, a prospective study was carried out. Methods A total of 402 surgically‐treated geriatric hip fracture patients were consecutively enrolled at a level 1 trauma center. On admission, all patients received an indwelling urinary catheter. Clinically symptomatic patients were screened more closely for UTI. Patients diagnosed with UTI were compared with asymptomatic patients. Outcomes in both patient groups were measured using in‐hospital mortality, overall length of hospital stay, wound infection, functional results and mobility at discharge. Multivariate regression analysis was carried out to control for influencing factors. Results A total of 97 patients (24%) sustained a UTI during in‐hospital treatment. UTI were independently associated with inferior functional outcomes as assessed by the Barthel Index (β = −0.091; P = 0.031), Timed Up and Go test (β = 0.364; P = 0.001) and Tinetti test (β = −0.169; P = 0.001) at discharge. Additionally, length of hospital stay was significantly longer for patients with a UTI diagnosis (β = 0.123; P = 0.029) after controlling for all other variables. No differences were observed in the rate of wound infection (odds ratio 1.185; P = 0.898) or in‐hospital mortality (P < 0.997). Conclusions Patients with UTI seem to be at risk of inferior functional outcomes. In addition to an early detection of symptomatic UTI and a targeted antibiotic therapy, perioperative care should focus on preserving functional ability to protect these patients from further loss of independence and prolonged clinical courses. Geriatr Gerontol Int 2017; ••: ••–••.