BACKGROUND Evidence shows that living in small scale homelike Special Care Units (SCU) has positive effects on behavioural and psychological symptoms of patients with dementia. Effects on cognitive functioning in relation to care facilities, however, are scarcely investigated. The purpose of this study is to gain more insight into the effects of living in small scale homelike Special Care Units, compared to regular SCU's, on the course of cognitive functioning in dementia. METHODS A group of 67 patients with dementia who moved from a regular SCU to a small scale homelike SCU and a group of 48 patients with dementia who stayed in a regular SCU participated in the study. Cognitive and behavioural functioning was assessed by means of a neuropsychological test battery and observation scales one month before (baseline), as well as 3 (post) and 6 months (follow-up) after relocation. RESULTS Comparing the post and follow-up measurement with the baseline measurement, no significant differences on separate measures of cognitive functioning between both groups were found. Additional analyses, however, on 'domain clusters' revealed that global cognitive functioning of the small scale homelike SCU group showed significantly less cognitive decline three months after the transfer (p < 0.05). Effect sizes (95% CI) show a tendency for better aspects of cognition in favour of the homelike small scaled SCU group, i.e., visual memory, picture recognition, cognitive decline as observed by representatives and the clustered domains episodic memory and global cognitive functioning. CONCLUSIONS While there is no significant longitudinal effect on the progression of cognitive decline comparing small scaled homelike SCU's with regular SCU's for patients with dementia, analyses on the domain clusters and effect sizes cautiously suggest differences in favour of the small scaled homelike SCU for different aspects of cognition.