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We assessed visual processing related to navigational impairment in Alzheimer's disease hypothesizing that visual motion evoked responses to optic flow simulating observer self-movement would be linked to navigational performance. Mild Alzheimer's disease and older adult control subjects underwent open-field navigational testing, visual motion perceptual threshold determination and a battery of neuropsychological examinations. We recorded visual motion evoked potentials (EPs) at occipital and parietal sites during centred visual fixation. Randomly moving or stationary pattern pre-stimuli preceded horizontal motion and radial optic flow stimuli to separate motion N200s from pattern onset responses. Radial optic flow evoked N200 responses comparable with those obtained with uniform horizontal motion, despite the variety of motion directions in radial optic flow. Alzheimer's disease patients showed smaller radial optic flow N200s than older adult subjects, and these were greatly diminished when preceded by stationary dots. Combining N200 amplitudes with optic flow perceptual thresholds and contrast sensitivities yielded a strong correlation with navigational impairment in Alzheimer's disease (R2 = 0.95). We conclude that navigational impairment in Alzheimer's disease is linked to a disorder of extrastriate visual cortical motion processing reflected in specific perceptual and neurophysiological measures.