Family doctors in England are to be paid £55 every time they diagnose a case of dementia, NHS England has said.
NHS chiefs said the aim was to increase the number of sufferers who receive treatment for the condition, which causes a decline in brain function.
But the Patients Association called it "a step too far" that would mean a "bounty on the head" of some patients.
Fewer than half of the 800,000 people in the UK who are estimated to have dementia have been formally diagnosed.
Dementia is an umbrella term used for a collection of symptoms resulting from a number of different diseases of the brain.
There are many types but all tend to affect brain function and cause problems with memory, mental agility, language skills, and the ability to carry out everyday tasks.
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Dr Brian Hope: "I don't think for one minute ..[people] would make a false diagnosis in order to earn £55"
Under the scheme, doctors would receive the money for every extra patient given a diagnosis of dementia over a six-month period.
NHS England said it was "not just payment for diagnosis" and GP practices would have to form a detailed plan and show improving diagnosis rates.
Dr Martin McShane, national director for long term conditions at NHS England, said: "Dementia can be devastating both for individuals and their families.
"We know that more needs to be done across the health service to ensure that people living with dementia are identified so that they can get the tailored care and support they need.
"This additional investment is part of a larger range of measures to support GPs in their work tackling dementia."
How common is dementia?- It is predicted there will be around 850,000 people in the UK with dementia in 2015
- It mainly affects people over the age of 65
- Approximately one in 14 people over the age of 65 have dementia
- There are more than 40,000 people in the UK under the age of 65 who have dementia
Source: Alzheimer's Society
But Katherine Murphy, chief executive of the Patients Association, said it was "a distortion of good medical practice".
"We know GPs receive incentive payments to find all sorts of conditions, such as high cholesterol, raised blood pressure and diabetes - but this seems a step too far. It is putting a bounty on the head of certain patients," she said.
"Good GPs will be diagnosing their dementia patients already. This seems to be rewarding poor GPs.
"There is an issue of people presenting late with dementia to doctors, but this is not the right way to go about tackling that. If people were given hope that something could be done, that would be the greatest incentive for coming early."
Tailored supportNHS England has already committed to ensuring two thirds of the estimated number of people with dementia are identified and receive high-quality post diagnostic support by 2015 - but has admitted data showed progress towards that target was much lower than expected.
Health chiefs have identified a gap of around 90,000 patients - an average of 12 per practice - who could benefit from a more timely diagnosis, for which an additional £5m has been made available to boost existing work to identify people with dementia so tailored support can be put in place.
The money is on top of an existing scheme launched last year, costing £42m nationally and involving 85% of GP practices, while there is also a further £31m in incentives already offered to family doctors for the care of patients after they have been diagnosed.
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