Neuron and synapse loss together with neurotransmitter dysfunction have, along with Abeta deposition and neurofibrillary tangles, been recognized as hallmarks of Alzheimer's disease (AD). Furthermore, clinical and preclinical studies point to neuronal loss and associated neurochemical alterations of several transmitter systems as a main factor underlying both cognitive and neuropsychiatric symptoms. Treatment for the cognitive decline in AD, based on early findings of a cholinergic deficit, has been in the clinic for more than a decade but provides only modest benefit in most patients. Therefore there is still considerable scope for new treatments that demonstrate greater efficacy against cognitive dysfunction in spite of the fact that the mainstays of current treatments, the cholinesterase inhibitors Aricept, Exelon and Reminyl (Razadyne) will become generic over the next few years. However, the most important area for drug development is for the treatment of behavioural disturbance in AD since many existing treatments have limited efficacy and have potentially life-threatening side effects. This review examines the neurochemical underpinning of both cognitive and neuropsychiatric symptoms in dementia and provides some basis for rational drug development.