Objectives Several cholinergic nuclei, and in particular the nucleus basalis of Meynert, are localised to the substantia innominata in the basal forebrain. These nuclei provide major cholinergic innervation to the cerebral cortex and hippocampus, and have an essential role in cognitive function. The aim of this study was to investigate volumetric grey matter (GM) changes in the substantia innominata from structural T1 images in Alzheimer's disease (AD), dementia with Lewy bodies (DLB) and healthy older participants using voxel‐based morphometry. Methods Participants (41 DLB, 47 AD and 39 controls) underwent 3 T T1 magnetic resonance imaging and cognitive assessments. Voxel‐based morphometry analysis used SPM8 with a substantia innominata brain mask to define the subspace for voxel GM analyses. Group differences, and selected behavioural and clinical correlates, were assessed. Results Compared with that in controls, bilateral GM loss in the substantia innominata was apparent in both AD and DLB. Relative to controls, significant bilateral GM loss in the substantia innominata was observed in DLB and AD. In DLB, significant associations were also observed between substantia innominata GM volume loss, and the levels of cognitive impairment and severity of cognitive fluctuations. Conclusions Relative to that controls, atrophy of the substantia innominata was apparent in DLB and AD, and is associated with specific clinical manifestations in DLB. © 2016 The Authors. International Journal of Geriatric Psychiatry Published by John Wiley & Sons Ltd.