Systems for register-based monitoring of vaccine effectiveness (VE) against laboratory-confirmed influenza (LCI) in real time were set up in Stockholm County, Sweden, and Finland, before start of the 2016/17 influenza season, using population-based cohort studies. Both in Stockholm and Finland, an early epidemic of influenza A(H3N2) peaked in week 52, 2016. Already during weeks 48 to 50, analyses of influenza VE in persons 65 years and above showed moderately good estimates of around 50%, then rapidly declined by week 2, 2017 to 28% and 32% in Stockholm and Finland, respectively. The sensitivity analyses, where time since vaccination was taken into account, could not demonstrate a clear decline, neither by calendar week nor by time since vaccination. Most (68%) of the samples collected from vaccinated patients belonged to the 3C.2a1 subclade with the additional amino acid substitution T135K in haemagglutinin (64%) or to subclade 3C.2a with the additional haemagglutinin substitutions T131K and R142K (36%). The proportion of samples containing these alterations increased during the studied period. These substitutions may be responsible for viral antigenic change and part of the observed VE drop. Another possible cause is poor vaccine immunogenicity in older persons. Improved influenza vaccines are needed, especially for the elderly.