The purpose of this paper was to better understand the long-term care preferences of older people based on intergenerational demonstration effects and social exchange theory, derived from the literature on intergenerational family relationships. The authors relied on the 2014 China Longitudinal Ageing Social Survey database to test the study hypotheses. The results indicated that living with grandchildren was negatively related to the institutional care preferences of older people. Family members’ attitudes and older people’s life satisfaction significantly mediated the relationship between living with grandchildren and their institutional care preferences. Gender and marital status had potentially diverse effects on institutional care preferences. Therefore, in the context of China’s culture of filial piety, social exchange, and intergenerational demonstration, motivation may help foster intergenerational exchange and reciprocity in eldercare arrangements.