Alzheimer's disease (AD) is known to cause a variety of disturbances of higher visual functions that are closely related to the neuropathological changes. Visual association areas are more affected than primary visual cortex. Additionally, there is evidence from neuropsychological and imaging studies during rest or passive visual stimulation that the occipitotemporal pathway is less affected than the parietal pathway. Our goal was to investigate functional activation patterns during active visuospatial processing in AD patients and the impact of local cerebral atrophy on the strength of functional activation. Fourteen AD patients and fourteen age-matched controls were measured with functional magnetic resonance imaging (fMRI) while they performed an angle discrimination task. Both groups revealed overlapping networks engaged in angle discrimination including the superior parietal lobule (SPL), frontal and occipitotemporal (OTC) cortical regions, primary visual cortex, basal ganglia, and thalamus. The most pronounced differences between the two groups were found in the SPL (more activity in controls) and OTC (more activity in patients). The differences in functional activation between the AD patients and controls were partly explained by the differences in individual SPL atrophy. These results indicate that parietal dysfunction in mild to moderate AD is compensated by recruitment of the ventral visual pathway. We furthermore suggest that local cerebral atrophy should be considered as a covariate in functional imaging studies of neurodegenerative disorders.