Animal models of stroke demonstrated that white matter ischemia may cause both axonal damage and myelin degradation distant from the core lesion, thereby impacting on behavior and functional outcome after stroke. We here used parameters derived from diffusion magnetic resonance imaging (MRI) to investigate the effect of focal white matter ischemia on functional reorganization within the motor system. Patients (n = 18) suffering from hand motor deficits in the subacute or chronic stage after subcortical stroke and healthy controls (n = 12) were scanned with both diffusion MRI and functional MRI while performing a motor task with the left or right hand. A laterality index was employed on activated voxels to assess functional reorganization across hemispheres. Regression analyses revealed that diffusion MRI parameters of both the ipsilesional corticospinal tract (CST) and corpus callosum (CC) predicted increased activation of the unaffected hemisphere during movements of the stroke-affected hand. Changes in diffusion MRI parameters possibly reflecting axonal damage and/or destruction of myelin sheath correlated with a stronger bilateral recruitment of motor areas and poorer motor performance. Probabilistic fiber tracking analyses revealed that the region in the CC correlating with the fMRI laterality index and motor deficits connected to sensorimotor cortex, supplementary motor area, ventral premotor cortex, superior parietal lobule, and temporoparietal junction. The results suggest that degeneration of transcallosal fibers connecting higher order sensorimotor regions constitute a relevant factor influencing cortical reorganization and motor outcome after subcortical stroke. Hum Brain Mapp, 2012. © 2011 Wiley Periodicals, Inc.