Aim To review the best available evidence on nutritional supplementation for activities of daily living and functional ability of older people in residential facilities. Methods Electronic searches were carried out using CENTRAL, MEDLINE and EMBASE databases for the years 2006–2016. Randomized controlled trials and cluster‐randomized controlled trials that examined the effects of nutrition interventions aimed at improving the energy or protein intake alone or both in combination were included. Two authors independently reviewed all potential studies for inclusion against the eligibility criteria. We reviewed studies for outcome relevance and methodological rigor. Any disagreement was resolved by discussion. Results A total of eight studies were included, containing four randomized controlled trials and four cluster‐randomized controlled trials involving 698 participants. There was significant improvement in handgrip strength (mean difference 1.65 kg, 95% confidence interval 0.09–3.22 kg, P = 0.04), but no difference in activities of daily living (mean difference 2.06, 95% confidence interval −18.28–22.40, P = 0.84), balance (mean difference −1.10, 95% confidence interval −3.04–0.84, P = 0.27), gait velocity (mean difference 0.00, 95% confidence interval −0.03–0.03, P = 1.00) and death (RR 1.90, 95% confidence interval 0.61–5.99, P = 0.27). Conclusions Nutritional intervention with older people in residential facilities was effective in improving handgrip strength, but did not significantly improve scores for activities of daily living, balance, gait velocity or preventing death. Further studies with larger sample sizes and of high quality are required to investigate appropriate intervention methods and specific target participants. Geriatr Gerontol Int 2017; ••: ••–••.