In order to determine the factors associated with good and poor 1-year prognosis of demented patients, the caretakers of 100 home-based patients attending a specialist memory clinic were inteviewed. After the follow-up, 71% continued to live at home. Mild dementia, independence in activities of daily living, fair independence in functions of instumental activities of daily living, and lack of depression were clear signs for a good prognosis. Some patients with severe dementia and poor functional capacity continued to live at home. Continuing home care was also more likely if memory impairment, as opposed to functional problems, was expressed as the main concern. The proportion of caretakers mentioning memory decline as the main problem decreased during 1 year from 38% to 9% and the proportion mentioning functional problems increased from 48% to 64% among those continuing in home care. Memory disturbances are the first to appear and cause problems, but only functional decline threatens living at home.