Researchers said the findings opened up a 'whole new avenue' into the causes of Alzheimer's disease, while charities said it offered 'convincing evidence' that the toxic particles could get into the brain.
"Our results indicate that magnetite nanoparticles in the atmosphere can enter the human brain where they might pose a risk to human health, including conditions such as Alzheimer's'" said lead author Professor Barbara Maher, of Lancaster University.
"The particles we found are strikingly similar to magnetite nanospheres that are abundant in the airborne pollution found in urban settings, especially next to busy roads and which are firmed by combustion or frictional heating from vehicle engines or brakes."
Alzheimer's researcher Prof David Alsop of Lancaster University added: "This finding opens up a whole new avenue for research into a possible environmental risk factor for a range of brain diseases."
Around 800,000 people in Britain suffer from dementia, mostly Alzheimer's disease, and the figure is expected to increase as the population grows older.
Last week scientists reported that they have found a drug which appears to halt the progress of Alzheimer's by clearing the sticky plaques from the brain which prevent brain cells communicating. But nobody knows what causes the plaques to form in the first place.
Air pollution has already been implicated in lung disease and heart attacks and recent studies have suggested that it could also be a factor in cognitive decline with a US study in 2014 showing that people in highly polluted areas were 50 per cent more likely to suffer mental decline.