The present review focuses on the utility of the amplitude of P3 of as a measure of processing capacity and mental workload. The paper starts with a brief outline of the conceptual framework underlying the relationship between P3 amplitude and task demands, and the cognitive task manipulations that determine demands on capacity. P3 amplitude results are then discussed on the basis of an extensive review of the relevant literature. It is concluded that although it has often been assumed that P3 amplitude depends on the capacity for processing task relevant stimuli, the utility of P3 amplitude as a sensitive and diagnostic measure of processing capacity remains limited. The major factor that prompts this conclusion is that the two principal task variables that have been used to manipulate capacity allocation, namely task difficulty and task emphasis, have opposite effects on the amplitude of P3. I suggest that this is because, in many tasks, an increase in difficulty transforms the structure or actual content of the flow of information in the processing systems, thereby interfering with the very processes that underlie P3 generation. Finally, in an attempt to theoretically integrate the results of the reviewed studies, it is proposed that P3 amplitude reflects activation of elements in a event-categorization network that is controlled by the joint operation of attention and working memory.