Purpose: To investigate normal-appearing white (NAWM) and cortical gray (NAGM) matter separately in multiple sclerosis (MS) in vivo using diffusion tensor imaging (DTI). Materials and Methods: In 64 MS patients (12 primary progressive [PP], 38 relapsing remitting [RR], 14 secondary progressive [SP]) and 20 healthy controls, whole-brain apparent diffusion coefficient (ADC) and fractional anisotropy (FA) maps were acquired. A stimulated echo acquisition mode (STEAM) DTI sequence was used with minimal geometrical distortion in comparison to echo-planar imaging (EPI). NAWM and NAGM were identified using conventional magnetic resonance (MR) images, allowing a cautious assessment of FA in cortex. Results: Histogram analyses showed significant global FA decreases and ADC increases in MS NAWM compared to control WM. MS cortical NAGM had no significant global ADC increase, but FA was decreased significantly. In regional analyses, nearly all NAWM regions-of-interest (ROIs) had significantly increased ADC compared to controls, but FA was not changed. In nearly all cortical NAGM ROIs, ADC was significantly increased and FA significantly reduced. In multiple linear regression analyses in RR/SPMS patients, NAGM-ADC histogram peak height was associated more strongly with clinical disability than T2 lesion load. Conclusion: Tissue damage occurs in both NAWM and cortical NAGM. The cortical damage appears to have more clinical impact than T2 lesions.