Ketamine can either be snorted or swallowed
Frequent use of ketamine - a drug popular with clubbers - is being linked with memory problems, researchers say.
The University College London team carried out a range of memory and psychological tests on 120 people.
They found frequent users performed poorly on skills such as recalling names, conversations and patterns.
Previous studies said the drug might cause kidney and bladder damage. The London team and charity Drugscope said users should be aware of the risks.
Ketamine - or Special K as it has been dubbed - acts as a stimulant and induces hallucinations.
It has been increasing in popularity, particularly as an alternative to ecstasy among clubbers, as the price has fallen over recent years.
A gram now costs about £20 - half the price of cocaine.
In response, the drug was made illegal three years ago - it is currently graded class C - although it still remains legal for use as an anaesthetic and a horse tranquiliser.
The study split the participants into five groups - those using the drug each day, recreational users who took the drug once or twice a month, former users, those who used other drugs and people who did not take any drugs.
All of the people took part in a series of memory tests as well as completing questionnaires and were then followed up a year later, the Addiction journal reported.
Researchers found the frequent users group performed significantly worse on the memory tests - in some they made twice as many errors.
The study also showed performance worsened over the course of the year.
There was no significant difference between the other groups.
However, all groups of ketamine users showed evidence of unusual beliefs or mild delusions, such as conspiracy theories, the psychological questionnaires showed.
The study also raised concerns about the addictiveness of the drug - hair sampling from the recreational group showed drug use had doubled over the year.
Lead researcher Dr Celia Morgan said: "Ketamine use is increasing faster than any other drug in the UK, particularly among young people, and has now become a mainstream club drug.
"However, many young people who use this drug may be largely unaware of its damaging properties and its potential for addiction.
"We need to ensure that users are informed of the potentially negative consequences of heavy ketamine use."
Martin Barnes, chief executive of Drugscope, said the charity had already raised concerns about the drug and the study provided "further evidence" of the risk of using it.
"It is important that people are aware of the harms associated with the drug and that treatment services are equipped to provide necessary support. "