Alzheimer's disease affects 15 million people worldwide. As the elderly population grows, the incidence of Alzheimer's disease will also increase. It is estimated that by 2010, 40 million US citizens will be over the age of 65 years and by 2040, it is predicted that 14 million US citizens will have Alzheimer's disease. There is currently no treatment which stops or delays the progression of this condition; however, anticholinesterase therapy provides some symptomatic relief. The cognitive impairment experienced by patients with Alzheimer's disease is partially due to degeneration of cholinergic pathways within the CNS and therefore symptomatic treatments have focused on restoring cholinergic inputs. Donepezil is a second generation anticholinesterase drug which reduces cortical acetylcholinesterase activity and improves, or at least slows the decline in, cognitive functioning in patients with Alzheimer's disease. In patients with mild to moderate Alzheimer's disease, treatment with donepezil (5 to 10 mg/day) for 1 year extended the median time to a clinically evident functional decline by 5 months compared with treatment with placebo. In addition, patients receiving donepezil have also shown significant improvement in ratings of global function, cognition, activities of daily living and disease severity over a I-year period (p < 0.05 in each case). In patients with moderate to severe Alzheimer's disease, donepezil significantly improved ratings of behavior compared with placebo (p < 0.05). Donepezil treatment is associated with the well recognized adverse events which accompany cholinergic therapy. The most frequently reported adverse events with donepezil treatment are gastrointestinal complaints such as nausea, diarrhea and vomiting, and CNS conditions including dizziness, headache and insomnia. These adverse events are typically mild and transient. Preliminary data from a direct comparison of donepezil and rivastigmine suggests that donepezil may exhibit an improved tolerability profile compared with rivastigmine. Recent data suggest that use of donepezil is associated with a significant delay in the time to institutionalization. Data from modeling and pharmacoeconomic studies also predict that use of donepezil may lead to a reduction in costs. However, it is likely that these savings will be distributed across multiple healthcare and non-healthcare systems and may not be fully represented in the budgets of those who are responsible for the direct costs of providing this medication. Donepezil is the only cholinesterase inhibitor currently available in a once daily formulation and with a relatively simple dose escalation schedule. This regimen coupled with a good tolerability profile makes donepezil a first-line treatment for patients with mild to moderate Alzheimer's disease. However, only direct comparisons between donepezil and other second generation anticholinesterases will provide definitive data which can be used to maximize patient outcomes. In addition, wider clinical experience with donepezil may help to identify a subgroup of patients who respond strongly to treatment thus improving patient care and reducing costs.