17 patients with vascular dementia (VaD) representing moderate to severe stage of the disease and 11 age-matched control subjects were examined with spectral analysis of EEG and a neuropsychological test battery comprising visual, praxic, verbal and memory functions as well as Mini-Mental Status test. VaD patients did not have less activity in the alpha band than control subjects, but the alpha amplitude ratio between eyes closed (EC) and eyes open (EO) situations (EC/EO ratio) was decreased in VaD patients, compared to controls. In VaD the variables of the awake background EEG with eyes closed (amplitude of alpha, beta, theta and delta activity; mean frequency) had only a few correlations to neuropsychological test scores. However, the (EC)/(EO) alpha ratio showed significant correlations with several neuropsychological variables in the temporo-occipital and centro-parietal derivations and some of these correlations were lateralized to the left or right hemisphere. Frontal EEG derivations with less alpha activity did not reveal any correlations to neuropsychological variables. We conclude that the dynamic EC/EO alpha ratio variable may be even more sensitive in the assessment of brain dysfunction in VaD than the background EEG variables.