Hyponatremia is the most common electrolyte disorder and also a predictor of mild cognition impairment. However, the association between hyponatremia and dementia in long follow up periods is rarely investigated. A retrospective cohort study was performed using the claims data of all insured residents who were covered by Taiwan's universal health insurance from 2000 to 2011. A total of 4900 hyponatremia patients and 19545 matched comparisons were recruited for the analysis. The incidences of hyponatremia and dementia were diagnosed with clinical protocol and defined using the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM). Cox proportional hazard regression and Kaplan-Meier curves were used for the analyses. Independent of adjusting factors, hyponatremia patients had 2.36-fold higher chances of suffering dementia, including Alzheimer's disease (AD) and non-AD dementia, than the comparisons. Severe hyponatremia patients had higher risks of suffering dementia than the non-severe hyponatremia patients (adjusted hazard ratio: 4.29 (95% CI: 3.47-5.31) versus 2.08 (95% CI: 1.83-2.37)). A dose response relationship was observed between hyponatremia and dementia. Those hyponatremia patients with baseline or incident stroke had significantly higher chances of suffering dementia compared with those patients without hyponatremia and stroke. Stroke is a significant modifier of the relationship between hyponatremia and dementia. Cerebrovascular disease after incident hyponatremia must be prevented to reduce the incidence of dementia.