Background: Neurofibromatosis type 1 (NF1) is a single gene disorder associated with a high frequency of cognitive deficits and a complex cognitive phenotype. These cognitive deficits have been associated with focal areas of high signal intensity on T2 weighted MRI images but the relationship remains controversial. Method: A cohort of 76 children with NF1 and 45 unaffected sibling controls (aged 8-16 years) underwent extensive neuropsychological assessment, with the NF1 children having MRI examinations. Results: The presence or number of T2 hyperintensities (T2H) was not associated with cognitive dysfunction. However, the location of discrete (well circumscribed) T2H in the thalamus was associated with severe and generalised cognitive impairment. More diffuse lesions in the thalamus were also associated with reductions in IQ but the effects were less marked compared with the discrete lesions. Comparing children with NF1 to their unaffected siblings revealed more subtle effects of the lesions on cognitive ability. Conclusions: T2H cannot be used in general as a radiological marker for cognitive deficits in children with NF1; however, lesions in the thalamus are strongly associated with cognitive impairment. It is possible that lesions in the thalamus in conjunction with more general thalamic hypometabolism may compound the level of thalamic dysfunction, resulting in cognitive deficits well beyond those produced by T2H in other regions.