Background Malnutrition is common in patients with chronic obstructive pulmonary disease (COPD). This study aimed to explore its association with all-cause mortality, emergency hospitalisation and subsequently healthcare costs. Methods A prospective cohort observational pilot study was carried out in outpatients with COPD that attended routine respiratory clinics at a large tertiary Australian hospital during 2011. Electronic hospital records and hospital coding was used to determine nutritional status and whether a patient was coded as nourished or malnourished and information on healthcare use and 1-year mortality was recorded. Results Eight hundred and thirty four patients with COPD attended clinics during 2011, of those 286 went on to be hospitalised during the 12 month follow-up period. Malnourished patients had a significantly higher 1-year mortality (27.7% vs. 12.1%; p = 0.001) and were hospitalised more frequently (1.11 SD 1.24 vs. 1.51 SD 1.43; p = 0.051). Only malnutrition (OR 0.36 95% CI 0.14–0.91; p = 0.032) and emergency hospitalisation rate (OR 1.58 95% CI 1.2–2.1; p = 0.001) were independently associated with 1-year mortality. Length of hospital stay was almost twice the duration in those coded for malnutrition (11.57 SD 10.93 days vs. 6.67 SD 10.2 days; p = 0.003) and at almost double the cost (AUD $23,652 SD $26,472 vs. $12,362 SD $21,865; p = 0.002) than those who were well-nourished. Conclusion Malnutrition is an independent predictor of 1-year mortality and healthcare use in patients with COPD. Malnourished patients with COPD present both an economic and operational burden.