Objective Palliative care for dementia includes psychosocial interventions as first‐line treatment for challenging behaviour. However, the national dementia plan in Japan contradicts recommendations for palliative care for dementia. This study aimed to examine the association between care quality for patients with dementia and professional caregivers' perspectives regarding palliative care for dementia in Japanese community care settings. Methods In total, 2116 professional caregivers from 329 agencies (217 in‐home long‐term care support providers; 29 small‐scale, multiple home‐care providers; and 83 group homes) in Tokyo prefecture, Japan, completed cross‐sectional, paper‐based questionnaires about 3603 people diagnosed with dementia, in May 2016. Quality of care measures included physical restraint and antipsychotic medication use and quality of life. Patients' quality of life was assessed via the Japanese version of the Alzheimer's Disease Health‐related Quality of Life scale. The Japanese version of the Questionnaire on Palliative Care for Advanced Dementia was used to assess professional caregivers' knowledge and attitudes regarding palliative care for dementia. Results Professional caregivers' knowledge and attitudes regarding palliative care for dementia were positively associated with quality of life in patients with dementia. Physical restraint and antipsychotic medication were used regardless of professional caregivers' knowledge and attitudes. Conclusions Professional caregivers' perspectives regarding palliative care for dementia could have exerted a positive effect on quality of life in patients with dementia. A national strategy for advocacy and the protection of adults is required to integrate several laws and guidelines and prevent the use of antipsychotics as a form of chemical restraint. Copyright © 2016 John Wiley & Sons, Ltd.