Objective The aim of this study was to validate the reliability of the Chinese version of Addenbrooke's Cognitive Examination III (ACE‐III) for detecting dementia. Furthermore, the present study compares the diagnostic accuracy of ACE‐III with that of mini‐mental state examination (MMSE). Methods One hundred seventy‐seven patients with dementia and 180 healthy controls were included in the study. Results The reliability of ACE‐III was very good (α‐coefficient = 0.888). There was a significant negative correlation between Clinical Dementia Rating Scale score and total ACE‐III score. Further, there was a positive correlation between MMSE score and total ACE‐III score. Age exerted a significant effect on total ACE‐III score, memory score, and language score. In the present study, the cutoff score of 83 showed a sensitivity of 91.1% and a specificity of 83.1%. Conclusions The present findings support that the Chinese version of ACE‐III is a reliable assessment tool for dementia. Copyright © 2017 John Wiley & Sons, Ltd.