Background and Aims Little is known about the association between non‐alcoholic fatty liver disease (NAFLD) and dementia. Given that hepatic steatosis is linked to abnormal fat metabolism, and fat dysregulation in the brain is related to dementia, we aimed to investigate whether NAFLD is associated with an increased risk of dementia. Methods We conducted a nationwide cohort study involving 4 031 948 subjects aged 40–69 years who underwent ≥2 health check‐ups provided by the National Health Insurance Service in Korea between January 2004 and December 2007. Based on the hepatic steatosis index (HSI), subjects were categorized into non‐NAFLD (HSI <30 at all check‐ups) and NAFLD (HSI >36 at one or more check‐ups). Dementia defined by ICD‐10 codes with prescription data was followed up until December 2017. Cox proportional hazards regression models analysed the dementia risk. Results At baseline, 31.3% had NAFLD. During the median follow‐up of 9.5 years, 138 424 in NAFLD group and 69 982 in non‐NAFLD group developed dementia. NAFLD group was associated with a higher risk of dementia than non‐NAFLD group on multivariable‐adjusted analysis (hazard ratio HR, 1.05; p < .001), competing risk analysis (HR, 1.08; p < .001) and propensity‐score matched analysis (HR, 1.09; p < .001). The association between NAFLD and dementia risk was more prominent among females (HR, 1.16; p < .001). The association was stronger among non‐obese NAFLD subjects (BMI <25 kg/m2, HR, 1.09; p < .001) than obese NAFLD subjects. Conclusions This nationwide study found that NAFLD is associated with an increased risk of dementia. The association was prominent among females and non‐obese NAFLD subjects.