OBJECTIVES: Inappropriate use of Atypical Antipsychotics (AAPs) in elderly nursing home residents is a growing problem in geriatric medicine. The current study investigated clinically irrational  prescribing of AAPs to elderly nursing home residents in the treatment of dementia-related psychosis particularly in two forms: i) off-label prescribing-i.e., prescribing AAPs for an unapproved indication against FDA-issued warnings on the product label and, ii) polytherapy-i.e., concurrent use of two or more AAPs contrary to evidence-based treatment guidelines.   METHODS: The study utilized a sample of nursing home residents, obtained from 2004 National Nursing Home Survey database (NNHS). The study sample included residents aged 65 and over, with at least one prescription for a currently marketed AAP and having a primary diagnosis of dementia in accordance with ICD-9 codes. Off-label prescribing and polytherapy with AAPs served as the study dependent variables, along with a systematic analysis of demographic, clinical, social and other factors.  RESULTS: Out of 13507 nursing home residents in the database, 4955 individuals (36.6%) had a primary diagnosis of dementia. About 32% of these were prescribed at least one AAPs and less than 1% also used an additional AAPs. Elderly who were aged 80 years and over was the group with most prescriptions for AAPs (49%). In a specific population affected by schizophrenia and bipolar disorder, where AAP polytherapy may be clinically justified (58%) had a prescription for at least one AAP, with olanzapine (28%) being the most prescribed. About 7% of this population was also concurrently taking at least two AAPs. CONCLUSIONS: Overall, the use of polytherapy appears to be negligible in the sample diagnosed with dementia. However, in nursing home residents with co-morbidities, polytherapy with AAPs appears to be more pronounced compared to the larger dementia population. In addition, off-label prescribing seems widespread particularly in older population diagnosed with dementia.