Cerebral reorganization may limit the effects of central nervous system tissue damage on cognition in patients with multiple sclerosis (MS). This study investigated fMRI activation patterns in patients with relapsing-remitting MS and healthy control subjects during performance of a delayed recognition task. As intended, fMRI task performance was similar in the MS and the control group, whereas neuropsychological testing revealed reduced performance in the patient group on the Paced Serial Addition Test, a reference task for the assessment of cognitive function in MS. Patients overall showed more activation in left posterior parietal cortex than healthy control subjects. Global gray matter atrophy in the patient group was associated with low PASAT scores. In a multiple regression analysis including white matter lesion load and gray matter atrophy as covariates, PASAT performance correlated with activation in left posterior parietal cortex and right anterior midfrontal gyrus, indicating a reallocation of neuronal resources to help preserve function. Global gray matter atrophy correlated with activation in bilateral prefrontal cortex, dorsal ACC and left posterior parietal cortex and, furthermore, was associated with a low degree of deactivation in rostral ACC, suggesting neural inefficiency and consistent with a reduced capacity to modulate between frontoparietal task-associated activation and 'default network' activity. The current study provides evidence that altered brain activation in MS patients has two distinct components, one related to compensatory processes and one to neural inefficiency associated with tissue damage.