Posttraumatic stress disorder (PTSD) is frequently associated with cognitive disturbances and high prevalence of smoking. This study evaluated cognition in war veterans with PTSD and control subjects, controlled for the effect of smoking and brain derived neurotrophic factor (BDNF) rs6265 and rs56164415 genotypes/alleles. Study included 643 male war veterans with combat related PTSD and 120 healthy controls. Genotyping was done by real time PCR. Cognitive disturbances were evaluated using the Positive and Negative Syndrome Scale (PANSS) cognition subscale and the Rey-Osterrieth Complex Figure (ROCF) test scores. Diagnosis ( < 0.001), BDNF rs56164415 ( = 0.011) and smoking ( = 0.028) were significant predictors of the cognitive decline in subjects with PTSD. BDNF rs56164415 T alleles were more frequently found in subjects with PTSD, smokers and non-smokers, with impaired cognition, i.e., with the higher PANSS cognition subscale scores and with the lower ROCF immediate recall test scores. Presence of one or two BDNF rs56164415 T alleles was related to cognitive decline in PTSD. The T allele carriers with PTSD had advanced cognitive deterioration in smokers and nonsmokers with PTSD, and worse short-term visual memory function. Our findings emphasize the role of the BDNF rs56164415 T allele and smoking in cognitive dysfunction in war veterans with PTSD.