Nutritional status may be a modifiable factor in the progression of dementia. We examined the association of nutritional status and rate of cognitive and functional decline in a U.S. population-based sample. Study design was an observational longitudinal study with annual follow-ups up to 6 years of 292 persons with dementia (72% Alzheimer’s disease, 56% female) in Cache County, UT using the Mini-Mental State Exam (MMSE), Clinical Dementia Rating Sum of Boxes (CDR-sb), and modified Mini Nutritional Assessment (mMNA). mMNA scores declined by approximately 0.50 points/year, suggesting increasing risk for malnutrition. Lower mMNA score predicted faster rate of decline on the MMSE at earlier follow-up times, but slower decline at later follow-up times, whereas higher mMNA scores had the opposite pattern (mMNA by time β = 0.22, p = 0.017; mMNA by time2 β = −0.04, p = 0.04). Lower mMNA score was associated with greater impairment on the CDR-sb over the course of dementia (β = 0.35, p < 0.001). Assessment of malnutrition may be useful in predicting rates of progression in dementia and may provide a target for clinical intervention.