As the number of cognitively impaired elderly persons increases, the need for evidence-based assessments of their capacity to consent to medical treatment and research participation will grow. The authors conducted an electronic and manual literature search for all English-language articles examining the decision-making capacity of elderly persons with dementia or cognitive impairment, reviewing articles in relation to key areas of methodological, clinical, and policy importance. The 32 relevant studies identified were highly heterogeneous, even in their definitions and measurements of decisional capacity. Although incapacity is common, many persons with dementia are capable of making their own medical and research decisions. In Alzheimer disease, memory and executive-function deficits predict decisional impairment. Still, at least in early stages of dementia, interventions may improve decisional abilities. Short and simple cognitive screening may be useful by identifying persons in need of more intensive evaluations. The use of expert judgment-based methods may mitigate the problem of a lack of a criterion standard for competence. Research into the decision-making competence of cognitively impaired elderly persons is a growing field. It is beginning to yield findings with practical implications for preserving the autonomy and welfare of this group of vulnerable elderly patients.