Background Little evidence is available about how quality of life (QoL) changes as dementia progresses. Objectives We explored QoL trajectories over a 20‐month period and examined what predicted change in QoL. Method Fifty‐one individuals with a diagnosis of Alzheimer's, vascular or mixed dementia (people with dementia (PwD)) participating in the Memory Impairment and Dementia Awareness Study rated their QoL using the QoL‐Alzheimer's Disease Scale at baseline and at 20‐month follow‐up. PwD also rated their mood and quality of relationship with the carer. In each case, the carer rated his or her level of stress and perceived quality of relationship with the PwD. Results There was no change in mean QoL score. Nearly one‐third of PwD rated QoL more positively at 20‐month follow‐up and nearly one‐third rated QoL more negatively. These changes could be regarded as reliable in one‐quarter of the sample. Participants taking acetylcholinesterase‐inhibiting medication at baseline were more likely to show a decline in QoL score. There were no other significant differences between those whose scores increased, decreased or stayed the same on any demographic or disease‐related variables, or in mood or perceived quality of relationship with the carer. Whereas baseline QoL score was the strongest predictor of QoL at 20 months, the quality of relationship with the carer as perceived by the PwD was also independently a significant predictor. Conclusions There is a degree of individual variation in QoL trajectories. Use of acetylcholinesterase‐inhibiting medication appears linked to decline in QoL score, whereas positive relationships with carers play an important role in maintaining QoL in early‐stage dementia. Copyright © 2013 John Wiley & Sons, Ltd.