Similar manifestations of functional decline in ageing and Alzheimer's disease obscure differences in the underlying cognitive mechanisms of impairment. We sought to examine the contributions of top-down attentional and bottom-up perceptual factors to visual self-movement processing in ageing and Alzheimer's disease. We administered a novel heading discrimination task requiring subjects to determine direction of simulated self-movement from left or right offset optic flow fields of several sizes (25 degrees, 40 degrees or 60 degrees in diameter) to 18 Alzheimer's disease subjects (mean age = 75.3, 55% female), 21 older adult control subjects (mean age = 72.4, 67% female), and 26 younger control subjects (mean age = 26.5, 63% female). We also administered computerized measures of processing speed and divided and selective attention, and psychophysical measures of visual motion perception to all subjects. Both older groups showed significant difficulty in judging the direction of virtual self-movement [F(2,194) = 40.5, P less than 0.001] and optic flow stimulus size had little effect on heading discrimination for any group. Both older groups showed impairments on measures of divided [F(2,62) = 22.2, P less than 0.01] and selective [F(2,62) = 63.0, P less than 0.001] attention relative to the younger adult control group, while the Alzheimer's disease group showed a selective impairment in outward optic flow perception [F(2,64) = 6.3, P = 0.003] relative to both control groups. Multiple linear regression revealed distinct attentional and perceptual contributions to heading discrimination performance for the two older groups. In older adult control subjects, poorer heading discrimination was attributable to attentional deficits (R[superscript 2] adj = 0.41, P = 0.001) whereas, in Alzheimer's disease patients, it was largely attributable to deficits of visual motion perception (R[superscript 2] adj = 0.57, P less than 0.001). These findings suggest that successive attentional and perceptual deficits play independent roles in the progressive functional impairments of ageing and Alzheimer's disease. We speculate that the attentional deficits that dominate in older adults may promote the development of the perceptual deficits that further constrain performance in Alzheimer's disease.