To understand the heterogeneity of functional connectivity results reported in the literature, we analyzed the separate effects of grey and white matter damage on functional connectivity and networks in multiple sclerosis. For this, we employed a biophysical thalamo-cortical model consisting of interconnected cortical and thalamic neuronal populations, informed and amended by empirical diffusion MRI tractography data, to simulate functional data that mimic neurophysiological signals. Grey matter degeneration was simulated by decreasing within population connections and white matter degeneration by lowering between population connections, based on lesion predilection sites in multiple sclerosis. For all simulations, functional connectivity and functional network organization are quantified by phase synchronization and network integration, respectively. Modeling results showed that both cortical and thalamic grey matter damage induced a global increase in functional connectivity, whereas white matter damage induced an initially increased connectivity followed by a global decrease. Both white and especially grey matter damage, however, induced a decrease in network integration. These empirically informed simulations show that specific topology and timing of structural damage are nontrivial aspects in explaining functional abnormalities in MS. Insufficient attention to these aspects likely explains contradictory findings in multiple sclerosis functional imaging studies so far.