BACKGROUND: in hospitalised older adults, cognitive impairments are common and may be associated with functional outcomes. Our aim was to systematically review this association. METHOD: we systematically searched MEDLINE, CINAHL, AMED and PsycINFO from inception to April 2016. Non-English language studies were filtered out at search stage. All types of studies were considered for inclusion except reviews, conference abstracts, dissertations and case studies. Population: community-dwelling or institutionalised older adults aged 65 years or more, who are acutely hospitalised and have information on history of dementia and/or cognitive scores on admission. Setting: acute hospital (excluding critical care and subacute or intermediate care). Outcome of interest: change in a measure of physical function or disability between pre-admission or admission, and discharge or post-discharge. This review was registered on PROSPERO (CRD42016035978). RESULTS: the search returned 5,988 unique articles, of which 34 met inclusion criteria. All studies were observational, with 30 prospective and 4 retrospective from 14 countries, recruiting from general medicine (n = 11), geriatric medicine (n = 11) and mixed (n = 12) wards. Twenty-six studies (54,637 participants) were suitable for the quantitative synthesis. The meta-analysis suggested that cognitive impairment was associated with functional decline in hospitalised older adults (risk ratio (RR): 1.64; 95% confidence interval (CI): 1.45–1.86; P < 0.01). Results were similar in subanalyses focusing on diagnosis of dementia (RR: 1.36; 95% CI: 1.05–1.76; P = 0.02; n= 2,248) or delirium (RR: 1.55; 95% CI: 1.31–1.83; P < 0.01; n= 1,677). CONCLUSION: cognitive impairments seem associated with functional decline in hospitalised older people. Causality cannot be inferred, and limitations include low quality of studies and possible confounding.