Treatment guidelines generally recommend careful assessment and non-pharmacological treatment approaches for behavioural and psychological symptoms of dementia. However, the inappropriate use of psychoactive drugs in patients with dementia in nursing homes is still prevalent. The aim of this narrative review is to summarise and criticize the most recent data investigating the adverse outcomes related to psychoactive drug use, specifically antipsychotics, antidepressants and benzodiazepines, in patients with dementia living in nursing homes. Searches of PubMed® and Web of Science® identified 790 potentially relevant articles, 23 of which were retained in this review. All studies investigated adverse outcomes of antipsychotics compared with non-use, or with antidepressants and/or benzodiazepine anxiolytic or hypnotic drugs. Several studies focused on the comparison between atypical and conventional antipsychotics, risperidone often being the reference. The most frequently reported outcomes were mortality (all-cause or cardiovascular), falls and/or fractures, and cardiovascular or cerebrovascular events. Overall, for mortality or falls, the highest risk is for benzodiazepines, followed by conventional antipsychotics, antidepressants and atypical antipsychotics. Whatever the drug, the patient must be carefully monitored during the first days of treatment, which needs to be initiated at the lowest possible dose and for the shortest duration. In light of the high risk of adverse outcomes (falls, cardiovascular events, infections, mortality) for patients with dementia living in nursing homes, all drugs must be carefully prescribed. However, further studies comparing pharmacological with non-pharmacological interventions, with a realistic consideration of the structural nursing home organisation, would be welcome.