To accelerate new treatments for Alzheimer's disease, there is the need for human pathophysiological biomarkers that are sensitive to treatment and disease mechanisms. In this proof-of-concept study, we assess new biophysical models of non-invasive human MEG imaging to test the pharmacological and disease modulation of NMDA-receptor inhibition. Magnetoencephalography was recorded during an auditory mismatch negativity paradigm from (1) neurologically-healthy people on memantine or placebo (n = 19, placebo-controlled crossover design); (2) people with Alzheimer's disease at baseline and 16-months (n = 42, amyloid-biomarker positive, longitudinal observational design). Optimised dynamic causal models inferred voltage-dependent NMDA-receptor blockade using Parametric Empirical Bayes to test group effects. The mismatch negativity amplitude was attenuated when Alzheimer's disease was more severe (lower baseline mini-mental state examination) and after follow-up (versus baseline). Memantine increased NMDA-receptor inhibition, compared to placebo. Alzheimer's disease reduced NMDA-receptor inhibition in proportion to severity and over time. In line with preclinical studies, we confirm in humans that memantine and Alzheimer's disease have opposing effects on NMDA-receptor inhibition. The ability to infer such receptor dynamics and pharmacology from non-invasive physiological recordings has wide applications, including the assessment of other neurological disorders and novel drugs intended for symptomatic or disease-modifying treatments.