Neuropsychological measures have been widely used by clinicians to assist them in making judgments regarding a cognitively impaired patient's ability to independently perform important activities of daily living. However, important questions have been raised concerning the degree to which neuropsychological instruments can predict a broad array of specific functional capacities required in the home environment. In the present study, we examined 127 English-speaking and 56 Spanish-speaking patients with Alzheimer's disease (AD) and determined the extent to which various neuropsychological measures and demographic variables were predictive of performance on functional measures administered within the clinical setting. Among English-speaking AD patients, Block Design and Digit-Span of the WAIS-R, as well as tests of language were among the strongest predictors of functional performance. For Spanish-speakers, Block Design, The Mini-Mental State Evaluation (MMSE) and Digit Span had the optimal predictive power. When stepwise regression was conducted on the entire sample of 183 subjects, ethnicity emerged as a statistically significant predictor variable on one of the seven functional tests (writing a check). Despite the predictive power of several of the neuropsychological measures for both groups, most of the variability in objective functional performance could not be explained in our regression models. As a result, it would appear prudent to include functional measures as part of a comprehensive neuropsychological evaluation for dementia.