Vascular dementia (VAD) is currently considered to be the second most common cause of dementia in Europe and the USA, second to dementia of the Alzheimer's type (DAT). However, in Asia and many developing countries the incidence of VAD exceeds that of DAT. The positive clinical diagnostic workup for VAD requires six steps: (1) clear-cut quantitative assessment of cognitive deficits utilizing standard neuropsychological tests to establish and quantify the dementia syndrome and rule out pseudo-dementia OF depression; (2) ascertaining the presence of risk factors for stroke; (3) identifying cerebral vascular lesions by neuroimaging (MRI, Iodine or Xenon contrasted CT, PET and SPECT); (4) exclusion of other causes of dementia; (5) differential diagnosis of possible, probable or definite VAD versus DAT and ascertaining when there are mixtures of the two; and (6) temporal identification of causality between onset and progression of the dementia with identified cerebral vascular lesions. There are eight subtypes of VAD: (1) multi-infarct dementias. These are due to large cerebral emboli, and are usually readily identifiable; (2) strategically placed infarctions causing dementia; (3) multiple subcortical lacunar lesions. Patients with these develop VAD at least five to twenty-five times more frequently than those in age-matched general population samples; (4) Binswanger's disease (arteriosclerotic subcortical leuko-encephalopathy). This form is rare. Neuroimaging confirms the diagnosis during life but the diagnosis can not be made by neuroimaging alone; (5) mixtures of two or more of above VAD subtypes; (6) hemorrhagic lesions causing dementia; (7) subcortical dementias due to cerebral autosomally dominant arteriolopathy with subcortical infarcts and leuko-encephalopathy (CADASIL), or to familial amyloid angiopathies and coagulopathies all of which present with multiple subcortical lacunar lesions similar to Binswanger's disease; (8) mixtures of DAT and VAD. The clinical significance of leukoaraiosis and its suspected relationships to VAD remains to be better established. The presence of ischemic infarctions, single or multiple large or multiple small (lacunar) by neuroimaging are necessary for the diagnosis of VAD, but identifying their presence, by neuroimaging alone, does not permit the diagnosis of dementia which can only be established by neuropsychological assessments. VAD is a clinical entity, identifiable in at least 30-70% of patients after strokes but mechanisms responsible for the cognitive impairments are complex. Some of these mechanisms are incompletely understood but provide subjects for important future research.