Hospitalization for heart failure (HF) is frequently related to dyspnea, yet associations between dyspnea severity, outcomes, and health care costs are unknown. We aimed to describe characteristics of patients hospitalized for acute HF by dyspnea severity and to examine associations between dyspnea severity, outcomes and costs. We linked registry data for patients hospitalized for HF with Medicare claims to evaluate dyspnea and outcomes among patients 65 years and older. We classified patients by patient-reported dyspnea severity at admission. Outcomes included length of stay, mortality 30 days after admission, and days alive and out of the hospital, readmission, and Medicare payments 30 days after discharge. Of 48,616 patients with acute HF and dyspnea, 4022 (8.3%) had dyspnea with moderate activity, 19,619 (40.3%) with minimal activity, and 24,975 (51.4%) at rest. Patients with dyspnea with minimal activity or at rest had greater comorbidity, including renal insufficiency. Greater severity of baseline dyspnea was associated with mortality (moderate activity, 6.3%; minimal activity, 7.6%; at rest, 11.6%) and heart failure readmission (7.2%, 9.0%, and 9.4%). After multivariable adjustment, dyspnea at rest was associated with greater 30-day mortality and heart failure readmission, fewer days alive and out of the hospital, longer length of stay, and higher Medicare payments, compared to dyspnea with moderate activity. In conclusion, dyspnea at rest on presentation was associated with greater mortality, readmission, length of stay, and health care costs among patients hospitalized with acute HF.