The aim of this work was to determine the progression of cognitive impairment in Parkinson's disease (PD) patients with or without hallucinations. Two years after the first assessment, 36 PD patients were re-evaluated on standardized neuropsychological tests, including the Frontal Assessment Battery (FAB), and on rating scales for overall cognitive functioning, functional autonomy, behavioral disorders. Nine patients had hallucinations at baseline and endpoint assessments; 12 patients developed hallucinations during the follow-up; and 15 patients were hallucination-free throughout the study. Cognitive performance significantly declined in all three groups, but at endpoint assessment PD hallucinators scored significantly lower than nonhallucinators on phonological and semantic fluency tasks, immediate free recall and the go/no-go FAB subtest; moreover, they showed more severe apathy than nonhallucinators. Reduced phonological fluency at baseline (odds ratio [OR], 13.5; 95% CI: 1.34-135.98, P = 0.027) was the only independent predictor of onset of hallucinations after 2 years, whereas hallucinations (OR, 10.1; 95% CI: 1.94-51.54, P = 0.006) and poor phonological fluency (OR, 6.1; 95% CI: 1.04-35.03, P = 0.045) independently predicted development of diffuse cognitive impairment. We concluded that reduced verbal fluency scores may predict the onset of hallucinations, while hallucinations and poor phonological fluency may predict development of dementia in PD patients.