Two experiments examined processing of lexical ambiguity in healthy older control (HC), mild cognitive impairment (MCI) and Alzheimer's disease (AD) participants. In Experiment 1, groups of HC, MCI and AD participants took part in an ERP study in which they read lexically ambiguous items presented in a subordinate context and primed by the same item presented in a dominant context. Ambiguous items were homonyms (e.g., bank), metaphorical polysemes (e.g., star), or metonyms (e.g., rabbit). All participants exhibited smaller N400s for items preceded by a related prime. In addition, HC participants exhibited a smaller N400 for metonyms than for metaphorical polysemes or homonyms; this effect was diminished in MCI and AD participants. In Experiment 2, HC and MCI participants completed a primed lexical decision task where targets related to the subordinate meaning/sense of ambiguous items were preceded by primes biasing the dominant meaning/sense (e.g., financial-bank-river). In contrast to the results of Experiment 1, both HC and MCI participants showed priming for metonymic items, but not homonyms or metaphorical polysemes. These results suggest that basic knowledge of multiple senses of metonyms is preserved in MCI, but the processing advantage conveyed by this semantic richness is diminished in MCI and AD.