 Around 750,000 people in the UK are estimated to have dementia |
The National Institute for Health and Clinical Excellence said donepezil, rivastigmine and galantamine could be used to treat moderate stage disease.
Campaigners had argued patients in the early stages of Alzheimer's should also have access to the £2.50-per-day drugs.
But NICE said studies showed the drugs "did not make enough of a difference".
NICE guidelines cover England and Wales, but the health bodies in Scotland often follow suit.
The body has also ruled another drug, memantine, should be used only in clinical studies for people with moderately severe to severe Alzheimer's disease. 
Health care needs to be rationed. This is the reality of the modern world 
Eisai and Pfizer, who produce donepezil, also known as Aricept, said they were considering whether to seek a judicial review of the decision.
'Not good value'
About 750,000 people in the UK are estimated to have dementia, but only 78,000 patients take donepezil, rivastigmine and galantamine, with two thirds of those taking donepezil.
Galantamine is also known as Reminyl, rivastigmine as Exelon and memantine as Ebixa.
These drugs do not make enough of a difference for us to recommend their use for treating all stages of Alzheimer's disease
NICE
NICE guidance in 2001 recommended the drugs - which can make it easier to carry out everyday tasks - should be used as standard.
However, in July 2005 it said access to the drugs should be restricted because they were not good value for money.
It has now issued its final guidance, which will apply only to newly-diagnosed patients. Those already taking the drugs will continue to do so.
Andrew Dillon, chief executive of NICE, said: "Alzheimer's is a cruel and devastating illness and we realise that today's announcement will be disappointing to people with Alzheimer's and those who treat and care for them.
"But we have to be honest and say that, based on all the evidence, including data presented by the drug companies themselves, our experts have concluded that these drugs do not make enough of a difference for us to recommend their use for treating all stages of Alzheimer's disease.
"We have recommended the use of these drugs where they have the potential to make a real difference, which is at the moderate stage of the illness."
He told the BBC the appeal was "not designed to re-run the whole evaluation", but that "the appeal panel is to make sure the process has been followed properly".
Action on Alzheimer's, an alliance of more than 30 professional and patient organisations, reacted angrily to the ruling.
"The decision will force patients to wait until their condition deteriorates into a state of fear and confusion before receiving drugs that work," it said.
Speaking on the BBC's Today programme, Professor Clive Ballard, from the Alzheimer's Society, claimed there were "a number of clear errors during the [Nice] appeal process" that did not appear to have been "addressed".
He said: "I think that is a very serious allegation but I believe that to be true."
Help the Aged said one in five people over 80 were affected by dementia and the number of people living with the disease was set to double in a decade.
Jonathan Ellis, senior policy manager at the charity, said: "It cannot be right to allow the health of thousands of older people to deteriorate on the altar of cost."
A Department of Health spokesman said it would be "entirely inappropriate" to overrule NICE's decision.
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