Objectives To investigate the associations between the apolipoprotein E (APOE) ε4 allele, carbon dioxide (CO2) vasoreactivity, and cognitive performance and to explore the effect of CO2 vasoreactivity and hypertension on the associations between APOE and cognition. Design Observational. Setting Community. Participants Older adults (N = 625) enrolled in the Maintenance of Balance, Independent Living, Intellect and Zest in the Elderly of Boston Study. Measurements Change in cerebral blood flow velocity in response to CO2 challenge (CO2), measured using transcranial Doppler ultrasonography, Trail-Making Test Part B - A (TMT), Hopkins Verbal Learning Test delayed recall (HVLT). Results APOE-ε4 was associated with lower CO2 vasoreactivity (P =.009) and poorer performance on the TMT (P <.001) and HVLT (P <.001). Having hypertension and APOE-ε4 was associated with worse cognitive and CO2 vasoreactivity measures than having neither or either alone (P <.001 for TMT and HVLT, P =.01 for CO2 vasoreactivity). The association between APOE-ε4 and cognition was only significant if it was present concurrent with low CO2 vasoreactivity, defined as below the median of the sample (APOE by CO2 vasoreactivity interaction: P =.04 for TMT, P =.04 for HVLT). In hypertension, the association between APOE-ε4 and executive function was also only significant in participants with lower CO2 vasoreactivity (P =.005 for APOE by CO2 vasoreactivity). Conclusion Individuals at risk of Alzheimer's disease (AD) because they have APOE-ε4 may have lower CO2 vasoreactivity, which in turn may be contributing to the observed lower cognitive performance associated with this allele. The cognitive effect of APOE-ε4 is magnified in hypertension and low CO2 vasoreactivity. This study offers evidence that APOE-ε4 may be associated with microvascular brain injury even in the absence of clinical AD.