In multiple sclerosis (MS), diffuse degenerative processes in the deep grey matter have been associated with clinical disabilities. We performed a systematic study in MS deep grey matter with a focus on the incidence and topographical distribution of lesions in relation to white matter and cortex in a total sample of 75 MS autopsy patients and 12 controls. In addition, detailed analyses of inflammation, acute axonal injury, iron deposition and oxidative stress were performed. MS deep grey matter was affected by two different processes: the formation of focal demyelinating lesions and diffuse neurodegeneration. Deep grey matter demyelination was most prominent in the caudate nucleus and hypothalamus and could already be seen in early MS stages. Lesions developed on the background of inflammation. Deep grey matter inflammation was intermediate between low inflammatory cortical lesions and active white matter lesions. Demyelination and neurodegeneration were associated with oxidative injury. Iron was stored primarily within oligodendrocytes and myelin fibres and released upon demyelination. In addition to focal demyelinated plaques, the MS deep grey matter also showed diffuse and global neurodegeneration. This was reflected by a global reduction of neuronal density, the presence of acutely injured axons, and the accumulation of oxidised phospholipids and DNA in neurons, oligodendrocytes and axons. Neurodegeneration was associated with T cell infiltration, expression of inducible nitric oxide synthase in microglia and profound accumulation of iron. Thus, both focal lesions as well as diffuse neurodegeneration in the deep grey matter appeared to contribute to the neurological disabilities of MS patients.