Background: Delirium research is poorly studied in postacute care, a growing setting due to aging populations, as well as in dementia, a critical risk factor for delirium and particularly prevalent in postacute care. We investigated risk factors for delirium and its outcomes in older adults with and without dementia admitted to a subacute care unit (SCU) after exacerbated chronic conditions. Methods: This is a prospective cohort study including patients ≥65 years old admitted to an SCU for 12 months. We collected demographics, comprehensive geriatric assessments, and presence of dementia and delirium at admission. Outcomes included discharge to previous living situation, mortality, and functional evolution. Due to the high prevalence of dementia, a subgroup analysis was performed to investigate specific risk factors for delirium and related outcomes. Results: Of 909 patients (mean age [±SD] 85.8 ± 6.7; 60% women, 47.5% with dementia), 352 (38.7%) developed delirium. The main risk factor for delirium was dementia (HR [95% CI] 5.2 [3.5–7.7]); age, functional status, and urinary tract infections were also independently associated with delirium. In dementia patients, only age (HR [95% CI] 1.0 [1.004–1.1]) and being male (HR [95% CI] 1.7 [1.04–2.6]) were associated with delirium. Delirium was associated with greater mortality (10.8 vs. 3.9%; p < 0.001) and greater functional decline in the entire sample (–12.3 vs. –6.4 Barthel index points; p < 0.001). In the dementia subgroup, patients with delirium experienced greater functional loss (p = 0.013) and less functional recovery (p = 0.025). Conclusions: In older patients admitted to postacute care, dementia is the main risk factor for delirium, and delirium carries worse clinical and functional outcomes. In patients with dementia, delirium is also relevant, since it entails a functional loss at admission and lower functional recovery.