Objective The Alzheimer disease (AD) APOE ε4 risk allele associates with an earlier age at onset and increased amyloid‐β deposition, whereas the protective APOE ε2 allele delays the onset and appears to prevent amyloid‐β deposition. Yet the clinical and pathological effects of APOE ε2 remain uncertain because of its relative rarity. We investigated the effects of APOE ε2 and ε4 alleles on AD pathology and cognition in a large US data set of well‐characterized AD patients. Methods We studied individuals from the National Alzheimer's Coordinating Center autopsy cohort across the entire clinicopathological continuum of AD. Multivariate models were built to examine the associations between APOE alleles and AD neuropathological changes, using the APOE ε3/ε3 group as comparator. Mediation analysis was used to estimate the direct and indirect effects of APOE alleles on AD pathology and cognition (Clinical Dementia Rating Sum of Boxes and Mini‐Mental State Examination). Results Compared to APOE ε3/ε3, APOE ε2 is independently associated with lower Braak neurofibrillary tangle (NFT) stages and possibly fewer neuritic plaques, but has no direct effect on cerebral amyloid angiopathy (CAA) severity, whereas APOE ε4 is associated with more neuritic plaques and CAA, but has no independent effect on Braak NFT stage. Unadjusted analyses showed marked differences among APOE genotypes with respect to cognitive performance (ε2 > ε3 > ε4). Mediation analysis suggests that this is largely explained through effects on pathology. Interpretation Even when adjusted for age at onset, symptom duration, and other demographic variables, APOE ε2 is associated with milder AD pathology and less severe antemortem cognitive impairment compared to APOE ε3 and ε4 alleles, suggesting a relative neuroprotective effect of APOE ε2 in AD. Ann Neurol 2015;77:917–929