A study carried out in Germany on women who had lived at the same address for at least 20 years found those near busy roads were more likely to show signs of mild cognitive impairment, early memory problems that may lead to dementia.
The research published in the journal, Environmental Research, suggests that air pollution from traffic fumes may lead to inflammation in the brain.
The team from Heinrich-Heine University in Düsseldorf measured background levels of air pollution and the women's addresses from distances from busy roads that carried more than 10,000 cars a day.
Almost 400 women aged between 68 and 79 also underwent a battery of tests to detect memory problems.
They found that for women aged under 74 the nearer there lived to a busy road the worse they performed on the cognition tests.
The research paper said: "These results indicate that chronic exposure to traffic-related PM may be involved in the development of mild cognitive impairment and since mild cognitive impairment is a transition state between normal ageing and dementia, more research should be conducted with these women."
It is thought the fine particles in air pollution can pass through the lungs and lodge in the brain where they cause inflammation which is associated with dementia.
Lead author Ulrich Ranft wrote in the paper: "The results of the present study indicate that chronic exposure to traffic-related particulate matter may be involved in the development of mild cognitive impairment.
"As mild cognitive impairment is a transition state between normal ageing and dementia we intend to follow-up these women in order to explore the effect of exposure to fine particulate matter on the development of dementia, in particular Alzheimer's disease."
There are over 700,000 people with dementia in Britain and the number is expected to rise sharply as the population ages.