Background Despite possible major adverse cognitive, physical, social, and behavioral consequences, little is known about how persons living with dementia perceive satisfaction with life, a key component of well‐being. We sought to examine (i) whether persons living with dementia perceive a lower level of satisfaction compared to their peers without dementia and (ii) whether the associations between individual characteristics and life satisfaction are different between persons living with and without dementia. Methods Using a nationally representative sample of community‐dwelling older adults aged ≥70 years in the U.S. from the Health and Retirement Study, we compared scores on the Satisfaction with Life Scale (SWLS), a self‐reported 5‐item scale ranging from 1 to 7 (more satisfaction), between persons with probable dementia (n = 341) and those without (n = 5530), adjusting for individual characteristics. We also tested whether the associations between the individual characteristics and SWLS differ by dementia status. Results Scores on SWLS did not differ between persons with probable dementia and those without when adjusting for individual characteristics including limitations in activities of daily living (ADL) (adjusted difference, −0.09; 95% CI, −0.33 to +0.15; p‐value, 0.45). However, dementia status was associated with lower life satisfaction through the mediation of limitations in ADL (total effect, −0.29; bootstrapped 95% CI, −0.47 to −0.12). Most individual characteristics associated with lower life satisfaction were similar in the two groups, including younger age, more limitations in ADL, and depression. Less wealth was associated with lower satisfaction among persons without dementia but not among those with probable dementia. Conclusions Dementia status was only modestly associated with lower life satisfaction through the mediation of limitations in ADL among participants who were able to provide response. Future research is warranted to determine whether life satisfaction can be used as a meaningful outcome when evaluating well‐being among persons living with dementia.