Incorporating biomarkers into clinical drug trials for Alzheimer's disease (AD) could 1) increase the homogeneity of patients through improved diagnosis, 2) establish surrogate outcome measures for drug efficacy, 3) test pharmacogenetic bases of drug response, and 4) verify proposed mechanisms of drug action. Among biological correlates of AD, those with the greatest potential to improve diagnostic accuracy are genetic abnormalities that cause AD or increase the risk of AD; characteristic changes in amyloid derivatives and tau and blood in CSF; and neuroimaging detection of brain atrophy and reduction in brain metabolism and blood flow. Although there are no AD biological markers that qualify as true surrogate endpoints in clinical drug trials, indices of brain atrophy show promise as a technique to track progression of dementia and as a measure of treatment efficacy. Anti-amyloid strategies for treatment are the leading candidates for the next generation of Alzheimer therapies. Predicted changes in amyloid derivative levels in CSF can help verify drug activity and illuminate the mechanism of action.