Objective To examine reciprocal relations of loneliness and cognitive function in older adults. Methods Data were analyzed from 8382 men and women, age 65 and older, participating in the US Health and Retirement Study from 1998 to 2010. Participants underwent biennial assessments of loneliness and depression (classified as no, low or high depression) determined by the Center for Epidemiologic Studies Depression scale (8‐item version), cognition (a derived memory score based on a word list memory task and proxy‐rated memory and global cognitive function), health status and social and demographic characteristics from 1998 to 2010. We used repeated measures analysis to examine the reciprocal relations of loneliness and cognitive function in separate models controlling sequentially and cumulatively for socio‐demographic factors, social network, health conditions and depression. Results Loneliness at baseline predicted accelerated cognitive decline over 12 years independent of baseline socio‐demographic factors, social network, health conditions and depression (β = −0.2, p = 0.002). After adjustment for depression interacting with time, both low and high depression categories were related to faster cognitive decline and the estimated effect of loneliness became marginally significant. Reciprocally, poorer cognition at baseline was associated with greater odds of loneliness over time in adjusted analyses (OR 1.3, 95% CI (1.1–1.5) p = 0.005), but not when controlling for baseline depression. Furthermore, cognition did not predict change in loneliness over time. Conclusion Examining longitudinal data across a broad range of cognitive abilities, loneliness and depressive symptoms appear to be related risk factors for worsening cognition but low cognitive function does not lead to worsening loneliness over time. Copyright © 2016 John Wiley & Sons, Ltd.