Objective Older adults with anxiety disorders are burdened by impairment in neurocognition, which may be mediated by elevated circulating cortisol levels. In a randomized controlled trial of acute serotonin-reuptake inhibitor treatment for late-life anxiety disorder, we examined whether change in salivary cortisol concentrations during treatment predicted improvements in measures of memory and executive function. Methods We examined 60 adults aged 60 years and older, who took part in a 12-week trial of escitalopram versus placebo for generalized anxiety disorder. All subjects had pre-treatment and post-treatment assessments that included monitoring of peak and total daily cortisol and a comprehensive neuropsychological evaluation. Results Salivary cortisol changes during treatment showed significant associations with changes in immediate and delayed memory but no association with executive tasks (measures of working memory and set shifting). Analyses suggested that a decrease in cortisol due to serotonin-reuptake inhibitor treatment was responsible for the memory changes: memory improvement was seen with cortisol reduction among patients receiving escitalopram but not among patients receiving placebo. Conclusion Serotonin-reuptake inhibitor-induced alteration in circulating cortisol during treatment of generalized anxiety disorder predicted changes in immediate and delayed memory. This finding suggests a novel treatment strategy in late-life anxiety disorders: targeting hypothalamic-pituitary- adrenal axis dysfunction to improve memory.