Cognitive decline and hallucinations are common and debilitating non-motor symptoms, usually occurring during later phases of Parkinson’s disease (PD). Minor hallucinations (MH) appear early in the disease course and have been suggested to predict cognitive impairment and decline in PD, however, this has not been well-established by clinical research. Here, we investigated whether, in the absence of dementia, patients with PD and MH (without differences in frontal–subcortical and posterior cognitive functions) show altered brain oscillations and whether such MH-related electrophysiological changes are associated with cognitive impairments that increase over time. Combining model-driven electroencephalography analysis with neuropsychiatric and neuropsychological examinations in 75 patients with PD, we reveal enhanced frontal theta oscillations in patients with PD suffering from MH and link these oscillatory changes with lower cognitive frontal–subcortical functions. Neuropsychological follow-up examinations five years later revealed a stronger decline in frontal–subcortical functions in patients with MH, anticipated by stronger frontal theta alterations measured during the first assessment, defining an MH- and theta-oscillation-based early marker of a cognitive decline in PD.