Psychiatric and behavioral symptoms are common in all types of dementia and have important consequences for patients, caregivers, and society. This paper reviews recent studies of the etiology and management of these symptoms. Genetic and neurochemical studies indicate that cholinergic, serotonergic, and dopaminergic systems may influence the risk of psychiatric symptoms in patients with dementia. There is still no consensus regarding the management of such symptoms. Controlled studies of psychosocial interventions, usually performed in the nursing home setting, report encouraging results. Atypical antipsychotics may be effective in some cases but have a high risk of adverse events. There is emerging evidence that cholinesterase inhibitors may reduce and prevent such symptoms. More studies are needed to clarify the role of cholinergic and other psychotropic agents as well as nonpharmacologic interventions for psychiatric and behavioral symptoms in patients with dementia.