Older adults with major depressive disorder (MDD) may also have preclinical Alzheimer's disease (AD). Differential diagnosis is quite challenging due to the overlapping symptoms of MDD and AD. In the current study, we predicted that impaired long-term memory (an area most affected in early AD), but not executive function (an area affected in MDD and AD), would distinguish older depressed patients who developed AD from those who did not. Patients (N = 120) assessed as having MDD but not dementia at baseline were administered tests of cognitive function and followed longitudinally for subsequent diagnosis of AD. Using structural equation modeling we found a latent construct of long-term memory to be associated with AD to a greater extent than executive functioning. Additional analyses to enhance clinical utility of findings indicated that individual tests of episodic memory were most predictive of AD status. Tests of long-term memory can be utilized by the clinician when assessing for preclinical AD among depressed elderly.