Aim Few Australian studies have examined the impact of dementia on hospital outcomes. The aim of this study was to determine the relative contribution of dementia to adverse outcomes in older hospital patients. Method Prospective observational cohort study (n = 493) of patients aged ≥70 years admitted to four acute hospitals in Queensland. Trained research nurses completed comprehensive geriatric assessments using standardised instruments and collected data regarding adverse outcomes. The diagnosis of dementia was established by independent physician review of patients' medical records and assessments. Results Patients with dementia (n = 102, 20.7%) were significantly older (P = 0.01), had poorer functional ability (P < 0.01), and were more likely to have delirium at admission (P < 0.01) than patients without dementia. Dementia (odds ratio = 4.8, P < 0.001) increased the risk of developing delirium during the hospital stay. Conclusion Older patients with dementia are more impaired and vulnerable than patients without dementia and are at greater risk of adverse outcomes when hospitalised.