Little is known about the prevalence and correlates of psychotropic drug use in community-dwelling elders with dementia. Baseline data from 285 community-dwelling elders with a research classification of dementia enrolled in the observational Memory and Medical Care Study were analyzed. Of these, 33.3% with a research classification of dementia were clinically diagnosed, 28.8% used at least 1 psychotropic drug, and 61.8% had at least 1 behavioral or psychologic symptom of dementia. Presence of a behavioral or psychologic symptom of dementia was associated with a higher likelihood of a clinical diagnosis of dementia. A clinical diagnosis of dementia, not a behavioral or psychologic symptom of dementia, was associated with psychotropics use. Clinical recognition of dementia appears to be an intermediate step between presence of symptoms of dementia and the prescription of psychotropics. Most community-dwelling elders meeting the research criteria for dementia were not clinically diagnosed, despite contact with a physician (89%) in the previous year.