BACKGROUND: The evaluation of multi-dimensional outcomes such as health-related quality of life (HRQL) is particularly relevant in dementia where the disease can compromise all areas of functioning. The nature of dementia can make self-report difficult, yet the subjective nature of HRQL makes the value of proxy reports limited. Previous work suggests that there are domains of HRQL that are unique to dementia. We aimed to develop a conceptual framework of HRQL in dementia from the perspective of people with dementia and their carers and to examine differences in the reports of the HRQL of these two groups. METHODS: We combined existing literature and new qualitative data to develop the conceptual framework and analysed qualitative data using content analysis. RESULTS: We identified five domains: daily activities and looking after yourself, health and well-being, cognitive functioning, social relationships and self-concept, and each was defined by specific descriptive components. There were differences between people with dementia and carers in the way they described these domains. CONCLUSIONS: We have developed a conceptual framework of HRQL in dementia that incorporates the views of people with dementia and their carers. This provides the basis for the development of a new measure of HRQL in dementia (DEMQOL).