This narrative explores the impact of deinstitutionalization policies on the quality of life and care outcomes for individuals with Alzheimer’s disease and related dementias. We offer a historical perspective on these policies, their implications on dementia care, and the barriers to deinstitutionalization. The potential benefits of deinstitutionalization, such as improved quality of life and access to community-based support and services, are highlighted. Challenges and controversies surrounding safety, caregiver burden, and resource allocation are also examined. Ethical considerations related to the autonomy and decision-making capacity of people living with dementia are discussed. We present best practices and innovative models in dementia care that balance deinstitutionalization with appropriate care. We further put forth recommendations for future research and policy development in dementia care and deinstitutionalization, emphasizing the need for a balanced approach that respects the autonomy and preferences of people living with dementia while ensuring their safety and well-being.