Increasing studies suggest the importance of including prospective memory measures in clinical evaluation of dementia due to its sensitivity and functional relevance. The Prospective and Retrospective Memory Questionnaire (PRQM) is originally a self-rated memory inventory that offers a direct comparison between prospective and episodic memory. However, the informant's report has been recognized as a more valid source of cognitive complaints. We thus aimed to examine the validity of the informant-rated form of the PRMQ in assessing memory function of the patients and in detecting individuals with early dementia. The informants of 140 neurological outpatients with memory complaints completed the Taiwan version of the PRMQ. Tests of prospective memory, short-term memory, and general cognitive ability were also administered to non-demented participants and patients with early stages of Alzheimer's disease (AD). Results showed significant relationships between the PRMQ ratings and objective cognitive measures, and showed that higher ratings on the PRMQ were associated with increasing odds of greater dementia severity. Receiver operative characteristic (ROC) curves showed an adequate ability of the PRMQ to identify patients with dementia (93% sensitivity and 84% specificity). Hierarchical regression revealed that the PRMQ has additional explanatory power for dementia status after controlling for age, education and objective memory test results, and that the prospective memory subscale owns predictive value for dementia beyond the retrospective memory subscale. The present study demonstrated the external validity and diagnostic value of informants' evaluation of their respective patients' prospective and retrospective memory functioning, and highlighted the important role of prospective memory in early dementia detection. The proxy-version of the PRMQ is a useful tool that captures prospective and episodic memory problems in patients with early AD, in combination with standardized cognitive testing.