We examined the relationship of culturally adapted Chinese versions of the Mini-Mental State Examination (CMMS) and several functional measures to the effect of education on the clinical diagnosis of dementia in 554 subjects (55 to 95 years; median, 74) who had undergone intensive evaluation during the Shanghai survey of dementia. Low education was associated with increased prevalence of clinically diagnosed dementia. The standardized history and one functional scale (Pfeffer Outpatient Disability Scale [POD]) clustered closely with clinical diagnosis on factor analysis, whereas the CMMS, Instrumental Activities of Daily Living scale (IADL), and Activities of Daily Living scale (ADL) loaded additionally onto an education-weighted component. A logistic equation based on the CMMS, history, POD, and IADL was the best predictor of the clinical diagnosis of dementia, but history, POD, and IADL without a mental status score also predicted the diagnosis with a sensitivity of 88.6%, a specificity of 89.3%, a positive predictive value of 66.0%, and a negative predictive value of 97.1%. When dementia was diagnosed using an algorithm based on the three functional scales alone, low education continued to be associated with increased age-specific risk of dementia.