Spanish researchers interviewed 176 relatives of people with dementia about the patient's long-term drinking and smoking habits. They also surveyed a group of 246 control participants.
The results suggested those who drank alcohol over their lifetime were 47 per cent less likely to develop Alzheimer's disease than teetotallers.
How significant are the findings?
Dementia currently affects 820,000 people in the UK, a figure that is expected to reach 1 million by 2021.
Yet little is known about the risk factors associated with developing Alzheimer's disease, the most common form of the condition.
Various studies said that smoking either protects against or increases disease risk, while evidence for the effect of alcohol is harder to find.
In this study, researchers found no overall effect of smoking on disease risk, the number of cigarettes smoked, years smoking nor time since quitting before diagnosis.
But the adjusted risk of developing Alzheimer's disease was 47 per cent lower among those who regularly drank alcohol, which occurred in a dose-dependent manner.
The effect was even further pronounced among women who had consumed alcohol for 40 years or more.
These women benefited from 78 per cent reduced risk of disease. The benefits were independent of the most significant genetic risk factor, apolipoprotein E4 allele.
The authors said: 'Beneficial vascular effects of moderate drinking could be related to the potential protective effect of alcohol use on Alzheimer's disease.'
They also suggested that moderate alcohol intake may favourably alter release of the neuro transmitter acetylcholine in the brain.
Should guidance change?
The researchers concluded: 'With previous considerations in mind, we believe that our results add to existing evidence on the association between Alzheimer's disease and tobacco and alcohol.'
They said further work was needed to clarify the effect of interactions between tobacco and alcohol, and the role of other environmental factors remained largely unknown.
Rebecca Wood, chief executive of the Alzheimer's Research Trust, said: 'While the idea that alcohol might protect us from dementia is enticing, we don't yet know this with certainty.'
The best evidence for reducing dementia risk was a healthy diet, exercise, and stable BP and cholesterol levels, the charity said.
Ms Wood also called for more research into which lifestyle choices may reduce the risk of developing dementia.