Nonlinear EEG analysis attempts to characterize the dynamics of neural networks in the brain. Abnormalities in nonlinear EEG measures have been found repeatedly in Alzheimer's disease (AD). The present study was undertaken to investigate whether these abnormalities could already be found in the early stage of AD. In a representative sample of 49 community-dwelling elderly, Alzheimer's disease was diagnosed in 7 subjects. Correlation dimension (D2) and nonlinear prediction were measured at 16 electrodes and in two different activational states. Also, 10 surrogate data sets were generated for each EEG epoch in order to investigate the presence of nonlinear dynamics. Differences between nonlinear statistics derived from original and from surrogate data sets were expressed as Z-scores. We found lower D2 and higher predictability in the demented subjects compared to the normal subjects. The results obtained with the Z-scores pointed to changed nonlinear dynamics in frontal and temporal areas in demented subjects. However, the major differences between demented and healthy subjects are not due to nonlinearity. From this it appears that linear dynamics change first in the course of AD, followed by changes in nonlinear dynamics.