OBJECTIVE The objective of this study is to compare cognitive decline of elderly people after entering an institution with that of elders living in the community with similar clinical conditions. DESIGN The Personnes Agées QUID (PAQUID) cohort is a prospective population-based study which included, at baseline, 3777 community-dwelling people aged 65 years and older. Participants were followed-up for 22 years. Among those who were nondemented and living at home at baseline, 2 groups were compared: participants who entered a nursing home during study follow-up (n = 558) and those who remained living at home (n = 3117). Cognitive decline was assessed with Mini-Mental State Examination (MMSE), Benton visual retention test, and verbal fluency Isaacs Set Test. RESULTS After controlling for numerous potential confounders, including baseline MMSE and instrumental activities of daily living scores, incident dementia, depressive symptoms, and chronic diseases, nursing home placement was significantly associated with a lower score on MMSE between the last visit before and after institutionalization (difference of 2.8 points, P < .0001) and greater further cognitive decline after institutionalization (difference of 0.7 point per year, P < .0001). Similar results were found for the Benton memory test. In a second series of analysis in which the persons who became demented over the study follow-up were excluded, the results remained unchanged. CONCLUSIONS The present study suggests that institutionalized elderly people present a greater cognitive decline than persons remaining in the community. The reasons of that decline remain unclear and may be related to physical and psychological effects of institutionalization in elderly people.