Our aim was to investigate how energy intake modifies the association of the stage of dementia with health related quality of life (HRQoL) among institutionalized older people. A cross-sectional sample of 538 older long-term care residents with dementia in Helsinki, Finland were assessed with HRQoL (15D), energy intake (from one to two days), and the stage of dementia by the clinical dementia rating (CDR) scale. The energy intakes were standardized by z-scores to include both men and women in the same analyses. Severity of dementia was associated with HRQoL (15D index in CDR 0.5–1: 0.65 (0.11), CDR 2: 0.60 (0.10), CDR 3: 0.52 (0.10)). When the three groups of dementia severity were divided according to their energy intake quartiles, there was an association between the HRQoL and the stage of dementia (p < 0.001) and energy intake (p = 0.013); however, no interaction was observed (p = 0.30). While partial correlation analysis showed that energy intake correlated with HRQoL among residents with very mild/mild or moderate dementia, this was not observed among those with severe dementia. In moderate dementia, the dimensions of mobility and usual activities correlated significantly with higher energy intake. Both energy intake and severity of dementia are associated with HRQoL.