Objective: To understand how, on medical wards, judgements about capacity and best interests with respect to going home are made – in line with the Mental Capacity Act 2005 – for people with dementia and how decision-making around hospital discharge for people with dementia and their families might be improved. Design: Ward-based ethnography. Observational data were captured through: detailed fieldnotes, in-depth interviews, medical-record review and focus groups. Themes and key issues identified using constant comparative analysis of 29 cases. Participants: Theoretical sampling of key stakeholders, including patients with dementia (with and without residence capacity), their relatives and a range of practitioners from the multi-disciplinary teams providing health and social care. Setting: Three hospital wards (acute and rehabilitation) in two hospitals within two NHS healthcare trusts in the North of England over a period of nine months between 2008 and 2009. Results: Analysis highlights the complexity of judgements about capacity and best interests, along with the workings of the MCA, in relation to decisions about place of residence for people with dementia facing discharge from hospital. Five key themes emerged from data: the complexity of borderline decisions; the requirement for better understanding of assessment approaches in relation to residence capacity; the need for better documentation; the importance of narrative; and the crucial relevance of time and timing in making these decisions. Conclusions: We need: more support and training for practitioners, as well as support for patients and families; clarity about the information to be imparted to the person with dementia; more advocacy for people with dementia; appropriate assessments embedded in routine clinical practice; the patient with dementia to be centre-stage in this decision-making; and properly resourced step-down or rehabilitation units to facilitate timely and good decision-making about place of residence.