Dementia increases the risk of morbidity and mortality in hospitalized patients. However, information on the potential effects of dementia on the risks of acute organ dysfunction, severe sepsis and in-hospital mortality, specifically among inpatients with chronic obstructive pulmonary disease (COPD), is limited. The observational analytic study was inpatient claims during the period from 2000 to 2010 for 1 million people who were randomly selected from all of the beneficiaries of the Taiwan National Health Insurance in 2000. In total, 1406 patients with COPD and dementia were admitted during the study period. Hospitalized patients with COPD and free from a history of dementia were randomly selected and served as control subjects (n = 5334). The patient groups were matched according to age (±3 years), gender, and the year of admission, with a control/dementia ratio of 4. Only the first-time hospitalization data for each subject was analyzed. Logistic regression models were used to calculate the odds ratio (OR) of outcome measures (acute organ dysfunction, severe sepsis, and mortality), controlling for confounding factors (age, sex, comorbidity, infection site, hospital level, and length of stay). In COPD patients with dementia, the incidence rate of severe sepsis and hospital mortality was 17.1% and 4.8%, respectively, which were higher than the controls (10.6% and 2.3%). After controlling for potential confounding factors, dementia was found to significantly increase the odds of severe sepsis and hospital mortality with an adjusted OR (OR) of 1.38 (95% confidence interval [CI] 1.10-1.72) and 1.69 (95% CI 1.18-2.43), respectively. Dementia was also significantly associated with an increased OR of acute respiratory dysfunction (adjusted OR 1.39, 95% CI 1.09-1.77). In hospitalized COPD patients, the presence of dementia may increase the risks of acute respiratory dysfunction, severe sepsis, and hospital mortality, which warrants the attention of health care professionals.