Functional connectivity (FC) indicates the interdependencies between brain signals recorded from spatially distinct locations in different frequency bands, which is modulated by cognitive tasks and is known to change with aging and cognitive disorders. Recently, the power of narrow-band gamma oscillations induced by visual gratings has been shown to reduce with both healthy aging and in subjects with mild cognitive impairment (MCI). However, the impact of aging/MCI on stimulus-induced gamma FC has not been well studied. We recorded electroencephalogram (EEG) from a large cohort (N=229) of elderly subjects (>49 years) while they viewed large cartesian gratings to induce gamma oscillations and studied changes in alpha and gamma FC with healthy aging (N=218) and MCI (N=11). Surprisingly, we found that aging and disease changed power and FC in different ways. With healthy aging, alpha power did not change but FC decreased significantly. MCI reduced gamma but not alpha FC significantly compared with age and gender matched controls, even when power was matched between the two groups. Overall, our results show distinct effects of aging and disease on EEG power and FC, suggesting different mechanisms underlying aging and cognitive disorders.