OBJECTIVES: To compare the effect of a specialized care facility (SCF) on quality of life (QoL) for residents with middle- to late-stage dementia over a 1-year period with residence in traditional institutional facilities. DESIGN: A prospective, matched-group design with assessments of QoL every 3 months for 1 year. SETTING: Twenty-four long-term care centers and four designated assisted living environments in an urban center in western Canada. PARTICIPANTS: One hundred eighty-five residents with Global Deterioration Scores of 5 or greater were enrolled: 62 in the intervention SCF group and 123 in the traditional institutional facilities groups. INTERVENTION: The SCF is a 60-bed purpose-built facility with 10 people living in six bungalows. The facility followed an ecologic model of care that is responsive to the unique interplay of each person and the environment. This model encompasses a vision of long-term care that is more comfortable, more like home, and offers more choice, meaningful activity, and privacy than traditional settings. MEASUREMENTS: QoL outcomes were assessed using the Brief Cognitive Rating Scale, Functional Assessment Staging, Cohen-Mansfield Agitation Inventory, Pleasant Events Scale-Alzheimer's disease, Multidimensional Observation Scale of Elderly Subjects, and Apparent Affect Rating Scale. RESULTS: The intervening SCF group demonstrated less decline in activities of daily living, more sustained interest in the environment, and less negative affect than residents in the traditional institutional facilities. There were no differences between groups in concentration, memory, orientation, depression, or social withdrawal. CONCLUSION: The present study suggests that QoL for adults with middle- to late-stage dementia is the same or better in a purpose-built and staffed SCF than in traditional institutional settings.