The APOE epsilon4 gene and poor memory test performance have each been associated with an increased risk of developing dementia, but the relationship between these risk factors in predicting dementia is unclear. We examined the multivariate effects of APOE genotype, memory test performance and vascular risk factors in predicting incident Alzheimer's disease (AD) and vascular cognitive impairment (VCI) in the Canadian Study of Health and Aging. Delayed free recall was measured by the Buschke Cued Recall Test (BCRT). The study sample included 223 people who were identified as having no cognitive impairment (NCI) and either APOE epsilon3/epsilon3 or epsilon3/epsilon4 genotypes at the baseline clinical assessment. After 5 years, 182 (82%) still had NCI, 21 developed VCI (9%) and 20 AD (9%). Multivariate analyses demonstrated that APOE epsilon4 increased the risk of AD (OR, 3.48; CI, 1.15-10.48) but not VCI (OR, 0.89; CI, 0.24-3.27). Vascular risk factors increased the risk of VCI (OR, 2.18; CI, 1.36-3.51) but not AD (OR, 0.68; CI, 0.38-1.20). Lower BCRT scores conferred an increased risk of both VCI (OR, 1.75; CI, 1.27-2.42) and AD (OR, 1.86; CI, 1.29-2.67) but attenuated the APOE epsilon4 effect in AD. VCI and AD have different risk profiles and outcomes, but subtle memory difficulties may be an early feature of both.