Aim To examine whether elderly people with dementia have a higher prevalence of falls and sleep disturbances than those without dementia, and to determine the subjective sleep characteristics associated with falls in older adults with dementia. Methods This was a cross‐sectional, population‐based study derived from the data in the 2009 Taiwan National Health Interview Survey. A total of 123 older adults with dementia (aged 65 years or older), and 246 older adults without dementia who were randomly selected from the database were included. The occurrence of falls and subjective sleep characteristics (e.g. sleep hours, insomnia symptoms, daytime sleepiness, difficulty in breathing during sleep and daytime naps) were evaluated using the responses to the survey questions. Results The prevalence of falls in older adults with dementia were approximately twofold higher than that for those without dementia (27.6% vs 15.3%, P = 0.006). Older adults with dementia had longer sleep hours, and increased daytime sleepiness, daytime naps and difficulty in breathing during sleep (all P < 0.05) than those without dementia. Among older adults with dementia, daytime sleepiness was the only sleep characteristic that was significantly correlated to an increased risk of falls (adjusted odds ratio 5.56, 95% confidence interval 1.95–15.91) despite controlling for possible risk factors. Conclusions Older adults with dementia had a higher prevalence of falls and sleep disturbances than that observed for those without dementia. Daytime sleepiness was an independent risk factor of falls in elderly people, with dementia after accounting for a range of covariates. Geriatr Gerontol Int 2016; 16: 850–855.