Those who do so maintain their ability to do everyday tasks better than people simply given anti-dementia drugs, found German researchers.
They believe the approach could help transform treatment for those in care homes living with mild to moderate dementia.
The academics came to the conclusions after studying the effects of their specially designed programme on residents with varying levels dementia in five Bavarian nursing homes.
Participants in each home were randomly split into two groups, each with 10 people.
In the first set of groups, residents continued with their normal treatment, which included taking anti-dementia drugs and participating in normal nursing home activities.
In the second set, residents maintained their drug intake and normal activities, but also took part in the two hour group therapy sessions, six days a week.
They started by singing a song or hymn, and talking about feelings like happiness, which researchers termed the "spiritual" element.
Then they moved on to gentle physical activities including bowling, croquet, and balancing exercises. Group and individual puzzles, like word jumbles, and pencil and paper exercises, followed. Lastly they carried out everyday tasks like preparing snacks and doing light gardening.
As dementia progresses a person's ability to think and do gets worse.
But the researchers, from the Friedrich-Alexander University of Erlangen-Nürnberg, found that on average the cognitive and functional ability of those in the group sessions got no worse during the 12 month project.
By comparison, the thinking skills deteriorated those not assigned to the sessions, as did the ability to carry out everyday tasks.
Prof Elmar Graessel, who led the study, published in the journal BioMed Central Medicine, also said the therapy sessions were "at least as good" at improving cognitive function as anti-dementia drugs called cholinesterase inhibitors, which include the likes of Aricept and Exelon.
And he added: "We found that the effect on the patients' ability to perform daily living tasks was twice as high as achieved by medication."
He hoped the method would "extend the quality of, and participation in, life for people with dementia within a nursing home environment".
The academics want to extend the programme to see if it can halt dementia progression for longer than a year.
Dr Marie Janson, director of development at Alzheimer’s Research UK, said: "If these findings can be replicated in large-scale studies, this could greatly improve the lives of people with dementia."
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