Visual hallucinations (VHs) are common in dementia with Lewy bodies (DLB) and Parkinson's disease with dementia (PDD), while auditory hallucinations are rare. To neurophysiologically investigate the pathophysiology of VHs in these disorders, we studied event-related potentials (ERPs) of DLB, PDD, and Alzheimer's disease (AD) patients. We compared visual and auditory ERP latencies among PDD patients with and without VHs (PDD-H: 11, PDD-N: 6), DLB patients (24), and AD patients (21). To elicit visual and auditory ERPs, a facial discrimination paradigm and a conventional auditory odd-ball paradigm, respectively, were used. The mean visual P3 latencies in the PDD-H and DLB groups were significantly longer than that in the AD group, while the mean auditory P3 latencies in all four patient groups were comparable. The mean visual P2 latencies in the PDD-N, PDD-H, and DLB groups were significantly longer than that in the control group. Our findings suggest that visual cognitive functions are selectively impaired in hallucinatory patients with DLB and PDD. VHs may be associated in part with predominant visual cognitive impairments attributable to PDD and DLB pathologies. Our findings also suggest that the impairments occur at the early stage of facial information processing.