Dementia affects 50 million people worldwide and that number may treble by 2050, yet there are not many studies for this population, especially when they are living in homes for the aged. Regarding the latest published evidence, this study is a systematic review to investigate the effects of exercise on the physical, functional and cognitive capacity of institutionalized older adults with dementia. Searches were performed on Medline, PEDro, Lilacs, Scielo and Cochrane Library and this review follows the PRISMA guidelines, including only randomized controlled trials. The quality of studies was graded according to PEDro and the strength of the current evidence using the GRADE approach. This study is registered in PROSPERO (CRD42021232166). A total of ten studies met the inclusion criteria, with a sample of 876 participants with a mean age of 80 years old. The interventions were diversified, with multicomponent exercises, high-intensity functional training and activities of daily living training. The duration varied from three to six months and frequency averaged from two to three times a week. Studies suggested interventions with low technology, easy to implement and observed improvement in physical, functional and cognitive capacity, however there is no consistent evidence of which is the most suitable intervention. More studies should be encouraged considering the different types of dementia and levels of impairment, considering this is a diverse population that could benefit from physical exercise.