Cramer-Rao theory and computer simulations were used to show that the errors involved in calculating the magnetization and relaxation parameters of a two-component system decrease with: (1) increasing SNR, (2) increasing number of echoes used in the fitting procedure, and (3) increasing ratio of the relaxation times of the two components, T-22/T-21. Images of bi-compartmental phantoms of known T-2 values were acquired using an optimized imaging sequence, and an optimized fitting algorithm was used to calculate the T-2 values of the two components by fitting the resulting images to a bi-exponential decay model. Accuracy better than 6% was achieved in the calculations of the T-2 values of the two components, and region fitting provided better accuracy than pixel-by-pixel fitting. The procedures were used to calculate the T-2 and M-0 values of equine carpal bones with known degree of radiographic bone sclerosis. Although the T-2 and M-0 values of both water and fat components all decreased with the degree of radiographic bone sclerosis, the transverse relaxation of the water component. T-2w, showed a greater decrease with advanced stages of bone sclerosis. (C) 2004 Elsevier Inc. All rights reserved.