Psychiatric disorders (including psychosis, depression and anxiety disorders) as well as other behavioural and psychological symptoms of dementia (collectively referred to as BPSD) are common in the demented, regardless of presumed aetiology of dementia. They may appear even at the prodromal phase of dementia, while severity and incidence of many of them increases with progression of cognitive dysfunction. Development of BPSD is associated with several negative consequences, both for the patient and his/her caregivers. Presence of psychotic symptoms affects unfavourably further course of dementia, accelerating cognitive decline, increased number of hospitalizations, risk of institutionalization and mortality as well as greater degree of functional disability. A well-documented phenomenon correlated therewith is increased caregivers’ burden and increased risk of caregivers’ psychiatric problems, including depression. Treatment of BPSD is difficult and no uniformly accepted and universally effective management standard or guidelines have been proposed to date. Non-pharmacological approach is considered obligatory for most patients, while education of caregivers or institution personnel is paramount. The key issue is optimal dosage of anti-dementia drugs, including cholinesterase inhibitors and memantine. Efficacy of psychotropic drugs is largely limited and their clinical usefulness compromised by poor side effects profile of many of them. Particular care must be paid when using antipsychotics due to presumed risk of premature death secondary to cerebrovascular complications. Antidepressants, though relatively ineffective in treating depression and anxiety, might be an option in patients with agitation, aggression and psychosis as documented to date in the case of citalopram and trazodone.