Background: Health-related quality of life (HRQoL) has been shown to predict adverse health outcome in the general population. Objective: We examined the cross-sectional association between HRQoL and cognitive performance at baseline. Next, we explored whether baseline HRQoL predicted 5-year incident cognitive decline and dementia; and whether there were gender differences. Methods: 19,106 community-dwelling participants from the ASPirin in Reducing Events in the Elderly (ASPREE) trial, aged 65–98 years, free of major cognitive impairments, and completed the HRQoL 12-item short-form (SF-12) at baseline (2010-2014), were followed until June 2017. The physical (PCS) and mental component scores (MCS) of SF-12 were calculated. The cognitive tests were assessed at baseline, year 1, 3, 5 and 7 or close-out visit. Cognitive decline was defined as >1.5 SD drop from baseline on any of the cognitive tests. Dementia was adjudicated according to DSM-IV criteria. Linear and Cox proportional-hazards regressions were used to examine the cross-sectional and longitudinal associations respectively. Results: At baseline, higher PCS and MCS were associated with better cognition. Over a median 4.7-year follow-up, higher MCS was associated with a reduced risk of cognitive decline and dementia (12% and 15% respectively, per 10-unit increase) and a 10-unit higher PCS was associated with a 6% decreased risk of cognitive decline. PCS did not predict dementia incidence. Findings were not different by gender. Conclusion: Our study found that higher HRQoL, in particular MCS, predicted a reduced risk of cognitive decline and dementia over time in community-dwelling older people.