Background Diffusion tensor imaging (DTI) has been suggested as a potential biomarker of disease progression, neurodegeneration and de/remyelination in MS. However, the pathological substrates that underpin alterations in brain diffusivity are not yet fully delineated. We propose that in highly cohesive fiber tracts: 1) a relative increase in parallel (axial) diffusivity (AD) may serve as a measure of increased extra-cellular space (ESC) within the core of chronic MS lesions and, as a result, may provide an estimate of the degree of tissue destruction, and 2) the contribution of the increased extra-cellular water to perpendicular (radial) diffusivity (RD) can be eliminated to provide a more accurate assessment of membranal (myelin) loss. Objective The purpose of this study was to isolate the contribution of extra-cellular water and demyelination to observed DTI indices in the core of chronic MS lesions, using the OR as an anatomically cohesive tract. Method Pre- and post-gadolinium (Gd) enhanced T1, T2 and DTI images were acquired from 75 consecutive RRMS patients. In addition, 25 age and gender matched normal controls were imaged using an identical MRI protocol (excluding Gd). The optic radiation (OR) was identified in individual patients using probabilistic tractography. The T2 lesions were segmented and intersected with the OR. Average eigenvalues were calculated within the core of OR lesions mask. The proportion of extra-cellular space (ECS) within the lesional core was calculated based on relative increase of AD, which was then used to normalise the perpendicular eigenvalues to eliminate the effect of the expanded ECS. In addition, modelling was implemented to simulate potential effect of various factors on lesional anisotropy. Results Of 75 patients, 41 (55%) demonstrated sizable T2 lesion volume within the ORs. All lesional eigenvalues were significantly higher compared to NAWM and controls. There was a strong correlation between AD and RD within the core of OR lesions, which was, however, not seen in OR NAWM of MS patients or normal controls. In addition, lesional anisotropy (FA) was predominantly driven by the perpendicular diffusivity, while in NAWM and in OR of normal controls all eigenvectors contributed to variation in FA. Estimated volume of ECS component constituted significant proportion of OR lesional volume and correlated significantly with lesional T1 hypointensity. While perpendicular diffusivity dropped significantly following normalisation, it still remained higher compared with diffusivity in OR NAWM. The “residual” perpendicular diffusivity also showed a substantial reduction of inter-subject variability. Both observed and modelled diffusion data suggested anisotropic nature of water diffusion in ESC. In addition, the simulation procedure offered a possible explanation for the discrepancy in relationship between eigenvalues and anisotropy in lesional tissue and NAWM. Conclusion This paper presents a potential technique for more reliably quantifying the effects of neurodegeneration (tissue loss) versus demyelination in OR MS lesions. This may provide a simple and effective way for applying single tract diffusion analysis in MS clinical trials, with particular relevance to pro-remyelinating and neuroprotective therapeutics.