Background: Prospective memory (PM) is memory for planned tasks and activities and is important for maintaining functional independence. There is growing evidence that PM declines with age and is impaired in dementia. One way of addressing how early in the disease process PM difficulties arise, and whether the presence of these difficulties has diagnostic significance, is to examine those diagnosed with mild cognitive impairment (MCI), however to date, evidence is mixed regarding PM impairment in MCI. Different methods of assessment of PM are known to yield differing results, with naturalistic measures showing less age-related decline than laboratory measures. This study compares differing methods of assessment of PM in MCI and dementia. Cognitive correlates of PM function (retrospective memory, working memory and executive functioning) are related to PM function in normal adult aging, and are further explored in MCI and dementia in this study. Methods: MCI (n = 48), dementia (n = 39) and control participants (n = 53) were compared on Virtual Week, a measure that closely represents the types of PM tasks that actually occur in everyday life, as well as a naturalistic (take-home) PM task, and self- and informant-reports of memory on the Prospective and Retrospective Memory Questionnaire. Cognitive correlates were also assessed. Results: Group differences were found between those with MCI, dementia and healthy controls. Dementia participants also had a poorer performance on the naturalistic assessment. Self and informant reports yielded less reliable results than objective assessment. Group differences remain after cognitive correlates are taken into account. Conclusions: Prospective memory difficulties are experienced in the everyday lives of people with dementia, and are related to laboratory-based assessments, but do not appear to be evident on a naturalistic task for those with MCI. Group differences in PM remain once cognitive correlates are taken into account.