Background and PurposeObstructive sleep apnea is associated with increased dementia risk. Nocturnal hypoxemia, which can be more severe during rapid eye movement (REM) sleep, may be a key mechanism. This study examines how REM hypoxemia affects memory and explores whether hippocampal vulnerability to hypoxemia mediates this effect in older adults at risk for dementia.MethodsOlder adults aged ≥50 years (N = 338) with subjective or mild cognitive impairment (i.e., objective impairment) underwent neuropsychological, mood, and medical assessment, magnetic resonance imaging scanning (n = 135), and overnight polysomnography. Verbal learning and memory were assessed with the Rey Auditory Verbal Learning Test. REM sleep hypoxemia was measured using the Oxygen Desaturation Index‐3% (REM‐ODI). Hippocampal subfield (CA1, CA3, subiculum, and dentate gyrus) volumes were derived from T1 and high‐resolution hippocampus T2 scans. We determined whether the relationship between REM‐ODI and learning and memory was mediated by hippocampal subfield volume. Analyses were repeated in non‐REM sleep to determine whether the effects were REM‐specific.ResultsAlthough there was not a direct effect of REM‐ODI on verbal learning (p > 0.05) or memory (p > 0.05), mediation analyses showed a significant indirect effect of high REM‐ODI on poorer verbal learning (β = −0.09, 95% confidence interval [CI] = −0.238 to −0.005) and memory (β = −0.100, 95% CI = −0.255 to −0.005), which was mediated by CA1 volume. These associations were absent in non‐REM sleep (p > 0.05).ConclusionsHypoxemia during REM sleep may impair memory in people at risk for dementia by reducing CA1 hippocampal volume. Research is needed to explore whether interventions targeting REM sleep hypoxemia are protective against memory decline.