Children’s urban air pollution exposures result in systemic and brain inflammation and the early hallmarks of Alzheimer’s disease (AD). The apolipoprotein E (APOE) ε4 allele is the most prevalent genetic risk for AD. We assessed whether APOE in healthy children modulates cognition, olfaction, and metabolic brain indices. The Wechsler Intelligence Scale for Children (WISC-R) and the University of Pennsylvania Smell Identification Test were administered to 50 Mexico City Metropolitan Area children (13.4 ± 4.8 years, 28 APOE ε3 and 22 APOE ε4). N-acetylaspartate (NAA)/creatine (Cr), choline (Cho)/Cr, myo-inositol (mI)/Cr, and NAA/mI were calculated using proton magnetic resonance spectroscopy in the white matter of the frontal and parietal lobes, hippocampus, and pons. APOE ε4 versus ε3 children had a reduced NAA/Cr ratio in the right frontal white matter and decrements on attention, short-term memory, and below-average scores in Verbal and Full Scale IQ (>10 points). APOE modulated the group effects between WISC-R and left frontal and parietal white matter, and hippocampus metabolites. Soap was the predominantly failed odor in urban children and, in APOE ε4 versus ε3 carriers, strongly correlated with left hippocampus mI/Cr ratio. APOE modulates responses to air pollution in the developing brain. APOE ε4 carriers could have a higher risk of developing early AD if they reside in a polluted environment. APOE, cognition, and olfaction testing and targeted magnetic resonance spectroscopy may contribute to the assessment of urban children and their results could provide new paths toward the unprecedented opportunity for early neuroprotection and AD prevention.