Objective To determine the effectiveness of an exercise and functional activity therapy intervention in adults with early dementia or mild cognitive impairment compared with usual care.Design Randomised controlled trial.Setting Participants’ homes and communities at five sites in the United Kingdom.Participants 365 adults with early dementia or mild cognitive impairment who were living at home, and family members or carers.Intervention The intervention, Promoting activity, Independence, and Stability in Early Dementia and mild cognitive impairment (PrAISED), was a specially designed, dementia specific, rehabilitation programme focusing on strength, balance, physical activity, and performance of activities of daily living, which was tailored and progressive and addressed risk and the psychological needs of people with dementia. Up to 50 therapy sessions were provided over 12 months. The control group received usual care plus a falls risk assessment. Procedures were adapted during the covid-19 pandemic.Main outcome measures The primary outcome was score on the carer (informant) reported disability assessment for dementia scale 12 months after randomisation. Secondary outcomes were self-reported activities of daily living, physical activity, quality of life, balance, functional mobility, fear of falling, frailty, cognition, mood, carer strain, service use at 12 months, and falls between months 4 and 15.Results 365 patient participants were randomised, 183 to intervention and 182 to control. The median age of participants was 80 years (range 65-95), median Montreal cognitive assessment score was 20 out of 30 (range 13-26), and 58% (n=210) were men. Intervention participants received a median of 31 therapy sessions (interquartile range 22-40) and reported completing a mean 121 minutes of PrAISED exercise each week. Primary outcome data were available for 149 intervention and 141 control participants. Scores on the disability assessment for dementia scale did not differ between groups: adjusted mean difference −1.3, 95% confidence interval −5.2 to 2.6; Cohen’s d effect size −0.06, 95% confidence interval −0.26 to 0.15; P=0.51). Upper 95% confidence intervals excluded small to moderate effects on any of the range of outcome measures. Between months 4 and 15 the intervention group experienced 79 falls and the control group 200 falls (adjusted incidence rate ratio 0.78, 95% confidence interval 0.5 to 1.3; P=0.3).Conclusion The intensive PrAISED programme of exercise and functional activity training did not improve activities of daily living, physical activity, or quality of life; reduce falls; or improve any other secondary health status outcomes, despite good uptake. Future research should consider alternative approaches to maintaining ability and wellbeing in people with dementia.Trial registration ISRCTN Registry ISRCTN15320670.Data sharing might be possible for additional analyses by contacting the corresponding author.