Introduction Low fat free mass index (FFMI) is a component of the ESPEN diagnosis criteria of malnutrition, that only when accompanied with weight loss is considered to be a determinant of malnutrition. Our aims were to assess the prevalence of malnutrition in patients with chronic obstructive pulmonary disease (COPD) applying the ESPEN criteria, and to examine the ability of different components of the criteria to predict COPD severity, length of stay (LOS), hospital readmissions within 30 days and mortality. Methods Subjects were COPD patients (n = 121) admitted to Landspitali University Hospital from March 2015 to March 2016. Patients were screened for nutritional risk using Icelandic screening tool (ISS) and NRS-2002. Body composition was measured by bioelectrical impedance analysis (BIA). Lung function was measured by spirometry. Results The prevalence of malnutrition according to the ESPEN criteria was 21%. The association between nutritional assessment, applying different components of the ESPEN criteria, and COPD severity was highly significant, with the highest risk being associated with low FFMI OR (95% CI) 4.77 (2.03, 11.20; p < 0.001). There was a trend towards higher risk of hospitalization for >7 days in subjects with low FFMI (OR 2.46 95% CI 0.92, 6.59; p = 0.074) and increased risk of 6 and 9 months' mortality (OR 2.72 95% CI 0.88, 8.39, P = 0.082 and OR 2.72 95% CI 0.94, 7.87, P = 0.065, respectively) in subjects diagnosed as malnourished by the ESPEN criteria. Conclusion This study describes the prevalence of malnutrition in hospitalized COPD patients using the ESPEN criteria from 2015. Our findings suggest that FFMI could be used independently of weight loss for the diagnosis of malnutrition in COPD patients, although there remain some problems associated with its measurement in the clinical setting.