Parkinson's disease (PD) related dementia (PDD) develops in up to 80% of PD patients. The present study was performed to further unravel the underlying pathophysiological mechanisms by applying a new analysis approach that uses an atlas-based MEG beamformer to provide a detailed anatomical mapping of cortical rhythms and functional interactions. Importantly, we used the phase lag index (PLI) as a measure of functional connectivity to avoid any biases due to effects of volume conduction. MEG recordings were obtained in 13 PDD and 13 non-demented PD patients. Beamforming was used to estimate spectral power and PLI in delta, theta, alpha, beta and gamma frequency bands. Compared to PD patients, PDD patients had more delta and theta power in parieto-occipital and fronto-parietal areas, respectively. The PDD patients had less alpha and beta power in parieto-temporo-occipital and frontal areas, respectively. Compared to PD patients, PDD patients had lower mean PLI values in the delta and alpha bands in fronto-temporal and parieto-temporo-occipital areas, respectively. In addition, in PDD patients connectivity between pairs of regions of interest (Brodmann areas) was stronger in the theta band and weaker in the delta, alpha and beta bands. The added value of the present results over previous studies analysing frequency-specific changes in neuronal activity in PD patients, is the anatomical framework in which we demonstrated a slowing in neuronal activity and a reduction in functional connectivity in PD related dementia. Moreover, this study shows a widespread reduction in functional connectivity between different regions in PDD.