Alzheimer disease (AD) is the most prominent cause of dementia in the elderly. To determine changes in the AD brain that may mediate the transition into dementia, the gene expression of approximately 10,000 full-length genes was compared in mild/moderate dementia cases to non-demented controls that exhibited high AD pathology. Including this latter group distinguishes this work from previous studies in that it allows analysis of early cognitive loss. Compared to non-demented high-pathology controls, the hippocampus of AD cases with mild/moderate dementia had increased gene expression of the inflammatory molecule major histocompatibility complex (MHC) II, as assessed with microarray analysis. MHC II protein levels were also increased and inversely correlated with cognitive ability. Interestingly, the mild/moderate AD dementia cases also exhibited decreased number of T cells in the hippocampus and the cortex compared to controls. In conclusion, transition into AD dementia correlates with increased MHC II(+) microglia-mediated immunity and is paradoxically paralleled by a decrease in T cell number, suggesting immune dysfunction.