Improved methods of quantifying MRI are needed to study brain-behavior relationships in dementia. Rating scales are variable; lesion-tracing approaches can be subjective and ignore atrophy; segmentation of MRI hyperintensities is complicated by partial volume effects; and hyperintense lesions in different anatomical areas may have different effects. The goal of this study was to extend existing segmentation approaches to include hyperintensities and to demonstrate the utility of simultaneously assessing atrophy and lesion compartments in dementia. A semi-automated method was applied to quantify brain and cerebrospinal fluid (CSF) compartments and to subclassify hyperintensities into periventricular, deep white matter, thalamic and basal ganglia compartments. Twenty MR scans from participants in an ongoing dementia study were used to generate intra- and inter-rater reliability estimates. High intra- and inter-class correlation coefficients (0.83-0.99) were obtained for all measures and the semi-automated measurements were highly correlated with traced volumes. Brain, CSF and specific lesion volumes were significantly correlated with neuropsychological functions. In models using only total hyperintensity volumes, the effects of lesion compartments (such as thalamic) were masked. Simultaneous quantification of atrophy and anatomically distinct hyperintensities is important for understanding cognitive impairments in dementia.