Emerging research implicates a consistent reciprocal relationship between late-life anxiety and cognition. Understanding this relationship may clarify pathophysiological substrates of cognitive impairment and why co-occurring anxiety and cognitive impairment relates to poorer treatment prognosis for both conditions. This article critically reviews evidence of more prevalent anxiety in cognitively impaired older adults, elevated anxiety related to poorer cognitive performance, and more severe anxiety symptoms predicting future cognitive decline. It considers pathophysiologic mediators and moderators, and the influence of comorbid depression or medical illness in anxiety. Identified directions for future research includes use of in-depth anxiety assessment comparing normal and mild cognitively impaired older adults and use of challenging neuropsychological tests to determine if specific cognitive domains suffer in anxious older adults.