PURPOSE We investigated the experiences of cancer patients and their family caregivers who became aware that the cancer was terminal, how they became aware, and how they felt about disclosure of the information. PATIENTS AND METHODS In this cohort study, we administered questionnaires to 619 consecutive patients determined by physicians to be terminally ill and to their family caregivers. RESULTS A total of 481 patients and 381 family caregivers completed the questionnaire. A majority of patients (58.0%) and caregivers (83.4%) were aware of the patient's terminal status. Approximately 28% of patients and 23% of caregivers reported that they guessed it from the patient's worsening condition. The patient group was more likely than the caregiver group (78.6% v 69.6%) to prefer that patients be informed of their terminal status. Patients informed of their terminal diagnosis had a significantly better quality of life and fewer symptoms and had a lower rate of emotional distress than patients who guessed it from their worsening condition. Younger patients and patients who paid the treatment costs themselves were significantly more likely to want to be told when their illness was terminal. If the patient paid the treatment cost and was employed at the time of the cancer diagnosis, the family caregivers were more likely to prefer disclosure of terminal illness. CONCLUSION Most patients with terminal cancer and their family caregivers preferred disclosure, and patients who knew of their terminal diagnosis had a lower rate of emotional distress and a higher health-related quality of life.