Few studies have investigated how outdoor environments might disable people with dementia. The issue is rarely considered in planning and design guidelines and not at all in regulations, despite dementia being within the scope of disability discrimination legislation in the United Kingdom and other countries. This article reports a study that involved older people with mild to moderate dementias taking two walks, one in a real town centre and one in a virtual reality (VR) simulation. Adaptations were made to the VR simulation to test possible design improvements. Overall, the town centre posed relatively few problems for the 38 older people with dementia who participated, although more difficulty was evident with greater impairment. Some features of particular places were liked more than others, particularly the segregation of spaces from motor traffic. There were measurable benefits from using clear textual signs to support wayfinding and to identify objects and places in the environment. Diminished outdoor activity is likely to be experienced as a decrease in quality of life and may accelerate the progression of dementia. We conclude that older people with mild to moderate dementia should be encouraged to be active outdoors and that this can be facilitated by small environmental modifications. Some limitations of the VR technology used for the study are also reported.