Abstract Background The prevalence and overlap of psychotic symptoms among patients with dementia compared to those with delirium superimposed to dementia have received little attention. The aim of our study was to investigate the overlapping and distinguishing capability of psychotic symptoms among patients with dementia or with delirium superimposed to dementia, and to clarify their prognostic value. Methods We assessed 255 residents with dementia in nursing homes and acute geriatric wards for psychotic symptoms and delirium. The residents were divided into three groups: those with delirium (Group 1; n = 66), those with psychotic symptoms without delirium (Group 2; n = 74), and without psychotic symptoms or delirium (Group 3; n = 115). Results Of the participants, 30.9% suffered from delusions, 22.1% from visual hallucinations and 14.2% from auditory hallucinations. Delusions occurred more often in Group 2 than in Group 1. Of the subjects in Group 3, 6.5% suffered from misidentifications, whereas the respective figures in Groups 1 and 2 were 17.5% and 20.8%, respectively. Of those suffering from psychotic symptoms ( n = 109), one in three ( n = 35) suffered delirium, and two in three ( n = 74), psychotic symptoms without delirium. In the adjusted Cox proportional hazard model with Group 2 as the referent, we found no difference between the groups in mortality rates (Group 1: HR 0.98, 95% CI: 0.64–1.52 and Group 3: HR 1.49, 95% CI: 0.92–2.42). Conclusions Psychotic symptoms cannot be used to distinguish patients with dementia from those with delirium superimposed to dementia.