certainly notify DMV, which usually results in revoking of license.
however this doesn't necessarily settle it, especially for men (sorry, guys!) some people refuse to believe they don't have a license, say no-one has the right to take it and so.
all the above suggestions work for someone.
other things families have done, is disable the car, mount it on wheelblocks and let Dad "drive" it that way. apparently this creates much happiness;
in a small town, local police will sometimes help out by reminding the person he or she's not allowed to drive any more and this can work;
getting rid of the car altogether is great because few people with dementia can get it together to go out and buy another one (although one man did)
replacing car loss with ability to get out and about is important for lots of people. local taxi service, a helpful neighbor, good friends and a paid occasional driver are all ways to do this.
the only thing NOT to do is NOTHING. accident stats on people with dementia are frightening. of every ten people with dementia who finally were stopped from driving, six out of ten had been involved in accidents, three of which caused serious injury or death, usually not to the person driving. checl out the car of any person with dementia still driving and you will usuaily find eveidence of many scrapes, bumps and tiny collisions unaccounted for.
so whatever it takes, do that. and lots of good luck.