Previous studies found that 34-63% of patients with dementia suffer from psychotic symptoms, and previous theories suggest that patients with dementia are cognitively vulnerable and thus more at risk of psychosis, but few studies have explored potential psychosocial and health explanations for the dementia-psychosis link. This study aimed to investigate whether risk factors such as loneliness, low autonomy/control, poor physical health, anxiety, eyesight/hearing loss, and experiences of discrimination act as mediators or moderators of the dementia-psychosis link. Dementia was associated with psychosis through loneliness, poor autonomy/control, poor life satisfaction, poor physical health and eyesight loss as mediating variables. Discrimination did not moderate the association between dementia and psychosis. The results suggest that psychiatrists involved in dementia care should consider "social prescribing" of interventions that reduce patients' loneliness, increasing autonomy/control and life satisfaction through organized activities, employment or volunteering. Psychiatrists are encouraged to consider a range of problems that may make patients feel more cognitively vulnerable and, thus, more at risk of psychosis.