Activities of daily living (ADL) refer to the ability to care for self and perform daily activities within an individual's place or in outdoor environments. ADL comprise two main categories: Basic or physical ADL and Instrumental ADL. The latter allows for the earlier detection of functional decline than the former. The cognitive changes in neurodegenerative dementias contribute to the impaired ability of the patients to take care of themselves. Activities of daily living is a major criterion for diagnosing dementia. Furthermore, it has recently been emphasized that some impairment of activities of daily living, particularly of complex instrumental functions, is already present even in mild cognitive impairment prodromal stage of dementia, although mild cognitive impairment is distinguished from dementia by the absence of significant deficit in activities of daily living. The impaired activities of daily living increase the rate of institutionalization of the patients with dementia to nursing home and inevitably bring about the changes in the qualities of life not only of the patients but their caregivers. One of the best ways to evaluate the degree of impairment in activities of daily living and the care burden is through standardized functional assessment tools according to the severity of dementia. These tools provide objective data, thereby allowing the clinicians to judge decline and improvement in the functional status and to plan individualized care. In this review, we will review the clinical significance of evaluating ADL, the assessment tools according to the severity of dementia, and therapeutic approaches to enhance the functional levels. We will also review the impact of the impaired ADL on the quality of life among the patients and their care providers.