Introduction: The aims of this study were to describe the quality of life (QoL) of nursing-home residents with dementia and their balance, mobility, muscle strength and daily life activity, as well as to examine the associations between QoL and levels of balance, mobility, muscle strength and daily life activity. Methods: The study is cross sectional, and 170 nursing-home residents with dementia were included. Tests: “The quality of life in late-stage dementia scale” (QUALID), Berg Balance Scale, comfortable walking speed, maximum walking speed, 30-s sit-to-stand, Barthel Index, Clinical Dementia Rating Scale, the Clock Drawing Test and the Mini-Mental State Examination (MMSE) were used. Results: Our study showed that nursing-home residents with dementia are a heterogeneous group regarding registrations of QUALID and physical function measures. The scores on the QUALID ranged from 11 to 41 points. Higher scores on the 30-s sit-to-stand and Berg Balance Scale were associated with a better QUALID. For comfortable, as well as maximum, walking speed there was a trend towards better QUALID results for those participants with higher walking speed. Conclusions: Good muscle strength and balance were the most important physical performance variables significantly associated with a good QUALID score.