Acetylcholinesterase inhibitors (AChEIs) have been noted to increase bone density and quality in mice. Human studies are limited but suggest an association with improved bone healing after hip fracture. We examined the relationship between AChEI use and fracture risk in a national cohort of 360,015 male veterans aged 65 to 99 years with dementia but without prior fracture using Veterans Affairs (VA) hospital, Medicare, and pharmacy records from 2000 to 2010. Diagnosis of dementia, any clinical fracture (excluding facial and digital), comorbidities, and medications were identified using ICD‐9 and drug class codes. Cox proportional hazard models considering AChEI use as a time‐varying covariate and adjusting for fall and fracture risk factors compared the time‐to‐fracture in AChEI users versus non‐AChEI users. Potential confounders included demographics (age, race, body mass index), comorbidities associated with fracture or falls (diabetes, lung disease, stroke, Parkinson's, seizures, etc.) and medications associated with fracture or falls (bisphosphonates, glucocorticoids, androgen deprivation therapy [ADT], proton pump inhibitors [PPIs], selective serotonin receptor inhibitors [SSRIs], etc.). Competing mortality risk was considered using the methods of Fine and Gray. To account for persistent effects on bone density or quality that might confer protection after stopping the medication, we completed a secondary analysis using the medication possession ratio (MPR) as a continuous variable in logistic regression models and also compared MPR increments of 10% to minimal/no use (MPR 0 to <0.10). Among older veterans with diagnosis of dementia, 20.1% suffered a fracture over an average of 4.6 years of follow‐up. Overall, 42.3% of the cohort were prescribed AChEIs during the study period. The hazard of any fracture among AChEI users compared with those on other/no dementia medications was significantly lower in fully adjusted models (hazard ratio [HR] = 0.81;​ 95% confidence interval [CI] 0.75–0.88). After considering competing mortality risk, fracture risk remained 18% lower in veterans using AChEIs (HR = 0.82;​ 95% CI 0.76–0.89).