Background Impaired muscle function has been identified as a risk factor for declining cognitive function and cardiovascular health, both of which are risk factors for late-life dementia (after 80 years of age). We examined whether hand grip strength and timed-up-and-go (TUG) performance, including their change over 5 years, were associated with late-life dementia events in older women and whether any associations provided independent information to Apolipoprotein E ε 4 (APOE ε 4) genotype. Methods Grip strength and TUG were assessed in community-dwelling older women (mean ± SD; age 75.0 ± 2.6 years) at baseline (n = 1225) and 5 years (n = 1052). Incident 14.5-year late-life dementia events (dementia-related hospitalization/death) were obtained from linked health records. Cardiovascular risk factors (Framingham Risk Score), APOE genotyping, prevalent atherosclerotic vascular disease and cardiovascular-related medications were evaluated at baseline. These were included in multivariable-adjusted Cox-proportional hazards models assessing the relationship between muscle function measures and late-life-dementia events. Results Over follow-up, 207 (16.9%) women had a late-life dementia event. Compared with women with the highest grip strength (Quartile [Q] 4, 25.8 kg), those with the lowest grip strength (Q1, 16.0 kg) had greater hazard for a late-life dementia event (HR 2.27 95% CI 1.54-3.35, P < 0.001). For TUG, the slowest women (Q4, 12.4 vs. Q1, 7.4 s) also recorded a greater hazard for a late-life dementia event (HR 2.10 95% CI 1.42-3.10, P = 002). Weak hand grip (<22 kg) or slow TUG (>10.2 s) provided independent information to the presence of an APOE ε 4 allele (n = 280, 22.9%). Compared with women with no weakness and no APOE ε 4 allele, those with weakness and APOE ε 4 allele had a greater hazard (HR 3.19 95% CI 2.09-4.88, P < 0.001) for a late-life dementia event. Women presenting with slowness and the APOE ε 4 allele also recorded a greater hazard for a late-life dementia event (HR 2.59 95% CI 1.64-4.09, P < 0.001). For 5-year muscle function changes, compared with women with the lowest performance decrement (Q1), those with the largest decrement (Q4) had higher hazards for a late-life dementia event (grip strength HR 1.94 95% CI 1.22-3.08, P = 0.006; TUG HR 2.52 95% CI 1.59-3.98, P < 0.001) over the next 9.5 years. Conclusions Weaker grip strength and slower TUG, and a greater decline over 5 years, were significant risk factors for a late-life-dementia event in community-dwelling older women, independent of lifestyle and genetic risk factors. Incorporating muscle function measures as part of dementia screening appears useful to identify high-risk individuals who might benefit from primary prevention programmes.