Objective/methods: The Montreal Cognitive Assessment (MoCA) is an increasingly used screening tool for cognitive impairment. While it has been validated in multiple settings and languages, most studies have used a biased case-control design including healthy controls as comparisons not representing a clinical setting. The purpose of the present cross-sectional study is to test the criterion validity of the MoCA for mild cognitive impairment (MCI) and mild dementia (MD) in an old age psychiatry cohort (n = 710). The reference standard consists of a multidisciplinary, consensus-based diagnosis in accordance with international criteria. As a secondary outcome, the use of healthy community older adults as additional comparisons allowed us to underscore the effects of case-control spectrum-bias. Results: The criterion validity of the MoCA for cognitive impairment (MCI + MD) in a case-control design, using healthy controls, was satisfactory (area under the curve [AUC] 0.93; specificity of 73% less than 26), but declined in the cross-sectional design using referred but not cognitive impaired as comparisons (AUC 0.77; specificity of 37% less than 26). In an old age psychiatry setting, the MoCA is valuable for confirming normal cognition (greater than or equal to 26, 95% sensitivity), excluding MD (greater than or equal to 21; negative predictive value [NPV] 98%) and excluding MCI (greater than or equal to 26;NPV 94%); but not for diagnosing MD (less than 21; positive predictive value [PPV] 31%) or MCI (less than 26; PPV 33%). Conclusions: This study shows that validating the MoCA using healthy controls overestimates specificity. Taking clinical and demographic characteristics into account, the MoCA is a suitable screening tool—in an old age psychiatry setting—for distinguishing between those in need of further diagnostic investigations and those who are not but not for diagnosing cognitive impairment.