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Abstract Background Index measures for health-related quality of life (HRQoL) quantify the desirability (utility) of a certain health state. The commonly used generic index measure, e.g. EuroQol: EQ-5D, may underestimate relevant areas of specific diseases, resulting in lower validity. Disease-specific index measures on the other hand combine disease-specificity and quantification of perceived quality on several health domains of a certain disease into one single figure. These instruments have been developed for several diseases, but a dementia-specific HRQoL index instrument was not yet available. Facing the increasing individual and societal burden of dementia, specific HRQoL values with metric characteristics are especially useful because they will provide vital information for health outcome research and economic evaluations. Aims of the study To develop and validate the prototype of a dementia-specific HRQoL index measure: Dementia Quality of life Instrument (DQI), as the first step towards valuation of the dementia health state. Methods For development of the DQI we created a conceptual framework based on a review of the literature, qualitative interviews with people with dementia and their carers, expert opinion and team discussion. To assess validity we undertook a survey under 241 dementia professionals. Measurements consisted of ranking (1–5) and rating (1–10) of 5 dementia-specific DQI domains (memory, orientation, independence, social activities and mood) and simultaneously rating of 9 DQI-derived health states on a visual analogue scale (VAS). We also performed a cross-sectional study in a large sample of people with very mild to moderate dementia and their caregivers (N = 145) to assess feasibility and concurrent validity. In addition, caregivers valued 10 DQI and 10 EQ-5D + C derived health states of the patient simultaneously on the same VAS. Setting: outpatient clinics, nursing homes and patient residences. Results All professionals judged the selected DQI domains to be relevant. Differences in ranking and rating behaviors were small. Mood was ranked (≥3.3) and rated (≥8.2) as most, orientation as least important (rank ≤2.6, value 7.5) health domain for dementia. For the validation part of this study the completion rates for all domains were above 98% for patients and 100% for caregivers on patients. A priori hypothesized DQI versus QOL-AD correlations that were significant in both patients and caregivers were: memory/memory, orientation/memory, independence/physical health, social activities/energy and mood/mood. Patient/caregiver inter-rater agreement was low (K Conclusions Professionals judged all domains as relevant. The DQI prototype proved valid and feasible for patients and caregivers and is appropriate for very mild to moderate dementia. The differences in concurrent correlations with generic health status instruments imply that the dementia-specific DQI health domains indeed provide different information. The finding that patient HRQoL measured with the DQI was lower supports this notion. The new DQI shows comparable psychometric properties to the best available dementia-specific (QOL-AD) and generic (EQ-5D + C) measures. Further research is needed to generate values in the general population for each of the possible DQI states and to derive an algorithm that converts the 5 separate DQI domain scores into one single DQI Index score. Introducing the DQI Index will advance dementia-related HRQoL measurement by overcoming the shortcomings of generic and non-index instruments. This will allow more unequivocal interpretation of subjective dementia HRQoL states in dementia research.