Stroke is a leading cause of death and disability worldwide. With the advent of thrombolytic therapy in the treatment of acute stroke, it has become increasingly important to identify suitable patients for whom such therapy may be useful. Diffusion imaging has a high degree of sensitivity and specificity for diagnosing acute brain ischemia. The purpose of this article is to review the basis of diffusion weighted imaging (DWI), to consider its application in acute stroke and to recognize potential pitfalls and stroke mimics that might be encountered. Along with perfusion imaging. DWI helps in identifying the area of diffusion - perfusion mismatch representing the operational ischemic penumbra. Together with apparent diffusion coefficient (ADC) maps DWI images helps in distinguishing acute from subacute and chronic ischemic insults. The hyperintense area in DWI seen in acute brain ischemia can be reversed if early thrombolysis is instituted. In nearly half the patients with clinically defined transient ischaemic attack, DWI demonstrates ischaemic abnormality. The newer MR techniques developed for reducing susceptibility artifacts associated with diffusion imaging and the role of diffusion tensor imaging in the diagnosis of stroke have also been discussed in this review.