Hospitalization for heart failure (HF) is frequently related to dyspnea, yet associations among dyspnea severity, outcomes, and health care costs are unknown. The aim of this study was to describe the characteristics of patients hospitalized for acute HF by dyspnea severity and to examine associations among dyspnea severity, outcomes, and costs. Registry data for patients hospitalized for HF were linked with Medicare claims to evaluate dyspnea and outcomes in patients ≥65 years of age. We classified patients by patient-reported dyspnea severity at admission. Outcomes included length of stay, mortality 30 days after admission, days alive and out of the hospital, readmission, and Medicare payments 30 days after discharge. Of 48,616 patients with acute HF and dyspnea, 4,022 (8.3%) had dyspnea with moderate activity, 19,619 (40.3%) with minimal activity, and 24,975 (51.4%) at rest. Patients with dyspnea with minimal activity or at rest had greater co-morbidities, including renal insufficiency. Greater severity of baseline dyspnea was associated with mortality (moderate activity, 6.3%; minimal activity, 7.6%; at rest, 11.6%) and HF readmission (7.2%, 9.0%, and 9.4%). After multivariate adjustment, dyspnea at rest was associated with greater 30-day mortality and HF readmission, fewer days alive and out of the hospital, longer length of stay, and higher Medicare payments compared with dyspnea with moderate activity. In conclusion, dyspnea at rest on presentation was associated with greater mortality, readmission, length of stay, and health care costs in patients hospitalized with acute HF.