The objective of this study was to characterize the epidemiology of using potentially inappropriate medications associated with dementia exacerbation (DPIMs) in elderly outpatients with dementia. Electronic medical records were retrospectively reviewed for geriatric patients with dementia who were prescribed at least one medication in 2016 at a tertiary, university-affiliated hospital. The 2015 Beers criteria were used to define DPIMs. Logistic regression was performed to identify factors associated with prescribing DPIMs in patients with dementia. Among 2100 patients included in our study, 987 (47.0%) patients were prescribed at least one DPIM. Benzodiazepines were the most frequently prescribed DPIM followed by anticholinergics, histamine H2-receptor blockers, and zolpidem. The risk of prescribing DPIMs was significantly increased in female patients (odds ratio (OR) 1.355) with polypharmacy (OR 5.146) and multiple comorbidities (OR 1.129) (p < 0.05 for all). Coexistence of Parkinson’s disease (OR 1.799), mood disorder (OR 1.373), or schizophrenia (OR 4.116) in patients with dementia further increased the likelihood of receiving DPIMs. In conclusion, DPIMs were commonly used in elderly patients with dementia in Korea with benzodiazepines most frequently prescribed followed by anticholinergics. Female patients using polypharmacy with multiple comorbidities should be closely monitored to minimize unnecessary DPIM use and, ultimately, DPIM-related harms.