Visuo-attentional deficits occur early in Alzheimer's disease (AD) and are considered more responsive to pro-cholinergic therapy than characteristic memory disturbances. We hypothesised that neural responses in AD during visuo-attentional processing would be impaired relative to controls, yet partially susceptible to improvement with the cholinesterase inhibitor physostigmine. We studied 16 mild AD patients and 17 age-matched healthy controls, using fMRI-scanning to enable within-subject placebo-controlled comparisons of effects of physostigmine on stimulus- and attention- related brain activations, plus between-group comparisons for these. Subjects viewed face or building stimuli while performing a shallow judgement (colour of image) or a deep judgement (young/old age of depicted face or building). Behaviourally, AD subjects performed slower than controls in both tasks, while physostigmine benefited the patients for the more demanding age-judgement task. Stimulus-selective (face minus building, and vice versa) BOLD signals in precuneus and posterior parahippocampal cortex were attenuated in patients relative to controls, but increased following physostigmine. By contrast, face-selective responses in fusiform cortex were not impaired in AD and showed decreases following physostigmine for both groups. Task-dependent responses in right parietal and prefrontal cortices were diminished in AD but improved following physostigmine. A similar pattern of group and treatment effects was observed in two extrastriate cortical regions that showed physostigmine-induced enhancement of stimulus-selectivity for the deep versus shallow task. Finally, for the healthy group, physostigmine decreased stimulus and task-dependent effects, partly due to an exaggeration of selectivity during the shallow relative to deep task. The differences in brain activations between groups and treatments were not attributable merely to performance (reaction time) differences. Our results demonstrate that physostigmine can improve both stimulus- and attention-dependent responses in functionally affected extrastriate and frontoparietal regions in AD, while perturbing the normal pattern of responses in many of the same regions in healthy controls.