Institutional dementia care is increasingly directed towards small-scale and homelike care environments, in The Netherlands as well as abroad. In these facilities, a small number of residents, usually six to eight, live together, and normal daily household activities and social participation are emphasized. In a quasi-experimental study, we studied the effects of small-scale, homelike care environments on residents (n = 259), family caregivers (n = 206) and nursing staff (n = 305). We compared two types of institutional nursing care during a 1 year period (baseline assessment and follow-up measurements at 6 and 12 months): (28) small-scale, homelike care environments and (21) psychogeriatric wards in traditional nursing homes. A matching procedure was applied to increase comparability of residents at baseline regarding functional status and cognition. This study was unable to demonstrate convincing overall effects of small-scale, homelike care facilities. On our primary outcome measures, such as quality of life and behaviour of residents and job satisfaction and motivation of nursing staff, no differences were found with traditional nursing homes. We conclude that small-scale, homelike care environments are not necessarily a better care environment than regular nursing homes and other types of living arrangements should be considered carefully. This provides opportunities for residents and their family caregivers to make a choice which care facility suits their wishes and beliefs best.