Older people living in residential and nursing care homes spend a large proportion of their time within the boundaries of the home, and may depend on the environment to compensate for their physical or cognitive frailties. Regulations and guidelines on the design of care buildings have accumulated over time with little knowledge of their impact on the quality of life of building users. The Design in Caring Environments Study (DICE) collected cross-sectional data on building design and quality of life in 38 care homes in and near Sheffield, Yorkshire. Quality of life was assessed using methods which included all residents regardless of their frailty, and staff morale was also assessed. The physical environment was measured on 11 user-related domains using a new tool, the Sheffield Care Environment Assessment Matrix (SCEAM). Significant positive associations were found between several aspects of the built environment and the residents' quality of life. There was evidence that a focus on safety and health requirements could be creating risk-averse environments which act against quality of life, particularly for the least frail residents. Staff morale was associated with attributes of a non-institutional environment for residents rather than with the facilities provided for the staff. The new tool for assessing building design has potential applications in further research and for care providers.