Brain plasticity and cognitive compensation in the elderly are of increasing interest, and Alzheimer's disease (AD) offers an opportunity to elucidate how the brain may overcome damage. We provide neurophysiological evidence of a short-latency event-related potential (ERP) component (C145) linked to stimulus relevancy that may reflect cognitive compensation in early-stage AD. Thirty-six subjects with early-stage, mild AD and 36 like-aged normal elderly (controls) had their EEG recorded while performing our Number-Letter task, a cognitive/perceptual paradigm that manipulates stimulus relevancies. ERP components, including C145, were extracted from ERPs using principal components analysis. C145 amplitudes and spatial distributions were compared among controls, AD subjects with high performance on the Number-Letter task, and AD subjects with low performance. Compared to AD subjects, control subjects showed enhanced C145 processing of visual stimuli in the occipital region where differential processing of relevant stimuli occurred. AD high performers recruited central brain areas in processing task relevancy. Controls and AD low performers did not show a significant task relevancy effect in these areas. We conclude that short-latency ERP components can detect electrophysiological differences in early-stage AD that reflect altered cognition. Differences in C145 amplitudes between AD and normal elderly groups regarding brain locations and types of task effects suggest compensatory mechanisms can occur in the AD brain to overcome loss of normal functionality, and this early compensation may have a profound effect on the cognitive efficiency of AD individuals.