Objective Cognitive fluctuations (CFs) occur commonly in dementia of all types. While it is generally accepted that CFs can affect the clinical rating of dementia severity and neuropsychological performance, little is known about their impact on patients' activities of daily living (ADLs) and quality of life (QOL). Our study aims to explore the impact of CFs on ADLs and QOL among institutionalized patients with dementia. Methods The present study examined the nature and frequency of CFs in 55 institutionalized dementia patients. We used the Dementia Cognitive Fluctuation Scale (DCFS) to assess the presence and severity of CFs. The Alzheimer's Disease Functional Assessment of Change Scale (ADFACS) was used to assess patients' ADLs, and the Quality of Life in Late Stage Dementia scale (QUALID) was used to assess QOL. Linear regression models were used to assess the relationships between CFs, ADLs, and QOL. Results The mean age of the patients was 90.41 years (SD = 2.84). Their mean Aggressive Behavior Scale score was 1.13 (SD = 1.59), mean Severe Impairment Battery total score was 86.65 (SD = 13.77), and mean DCFS score was 10.07 (SD = 3.04). The mean ADFACS‐ADL score was 10.88 (SD = 6.37), mean ADFACS‐IADL score was 16.61 (SD = 9.54), and mean QUALID total score was 18.25 (SD = 5.70). DCFS significantly predicted ADFACS‐ADL score (R2 = 0.39, β = 0.30, P = .011) although the relationship between ADFACS‐IADL score and DCFS score was not significant (R2 = 0.16, P = .111). DCFS significantly predicted QUALID score (R2 = 0.08, β = 0.29, P = .033). Conclusion More severe CFs in patients with dementia were significantly associated with impaired ability to engage in ADLs and poorer QOL.