The European Medicines Agency said the side-effect risks of taking lecanemab particularly potentially lethal brain swelling outweigh its impact on slowing cognitive decline.
The drug, known under brand name Leqembi and awaiting approval in the UK, has already been given the green light in both the US and Japan.
But the EMA verdict is being seen as a setback to dementia patients and relatives in Britain.
Some experts believe that additional wealthy patients may now go to the US for the pioneering treatment.
A million people in the UK live with the condition - a total expected to rise to around 1.7 million by 2040.
Risk
Last year dementia killed 66,000 people in England and Wales and it is the leading cause of death in Britain.
Alzheimer's accounts for two-thirds of cases.
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