We examined the semantic impairment for natural kinds in patients with probable Alzheimer's disease (AD) and semantic dementia (SD) using an inductive reasoning paradigm. To learn about the relationships between natural kind exemplars and how these are distinguished from manufactured artifacts, subjects judged the strength of arguments such as "Humans have a chemical called sebum. Therefore, frogs have a chemical called sebum." These judgments depend on subjects' perception of the similarity between the familiar objects named in the premise and the conclusion. Controls rated arguments generalizing from a natural kind to an artifact as significantly weaker than arguments generalizing from one natural kind to another natural kind. SD patients demonstrated a graded profile of generalization without evidence of a categorical distinction between natural kinds and artifacts. AD patients' judgments also suggested more difficulty than controls at distinguishing between natural kinds and artifacts. Both SD patients and AD patients resembled controls in their judgments of arguments where both objects are from the natural kinds category. Semantic knowledge thus appears to be sufficiently preserved in both AD and SD to support within-category similarity judgments. We suggest that SD patients may be impaired in part at identifying the features critical to diagnosing membership in a semantic category, while AD patients' performance is consistent with their semantic categorization deficit.