Objective Quality of life (QoL) is one of the most important outcomes in improving well‐being in people with dementia (PwD). The primary aim of the present study was to compare self and carer ratings of QoL in PwD and to identify the most important factors influencing self and carer ratings. Methods We conducted a cross‐sectional analytic study of 488 dyads using the Quality of Life in Alzheimer's Disease scale, demographics, data on self‐rated health, and clinical characteristics. Results Higher levels of self‐rated health in PwD were associated with higher self‐rated QoL after controlling for depression and activities of daily living. When the carer experienced less stress related to caregiving, the PwD reported better QoL. Higher carer‐rated QoL was associated with less carer stress, better health for the family carer, and the PwD being of younger age. When carers lived with the PwD, and reported lower levels of depression and better functional ability for their relative, carer‐rated QoL was higher. Conclusions The self‐rated health of PwD and carers influences the ratings they make of the QoL of the PwD indicating that it is an important influence on QoL in this population. Copyright © 2014 John Wiley & Sons, Ltd.