This study examines and compares the rates and patterns of diffusion of computerized tomography (CT) and magnetic resonance imaging (MRI) over the first 4 years of their availability. Although early diffusion of CT was more rapid than that of MRI, adoption of MRI in nonhospital settings equaled that of CT. Analysis of attributes of the technologies and attributes of the regulatory, reimbursement, and market environments surrounding the early diffusion of these technologies provides insight into their different diffusion patterns. In particular, the technical and financial uncertainties surrounding MRI have inhibited its diffusion compared with that of CT. Medicare's DRG-based prospective reimbursement system and certificate-of-need (CON) regulation by states have reduced overall MRI diffusion and stimulated purchases of MRI by nonhospital organizations. The FDA's premarket approval (PMA) program has changed marketing strategies and influenced the diffusion of MRI to a lesser degree. This analysis identifies problems in how the present health care system evaluates and adopts new, expensive, diagnostic technologies and suggests changes to make the system more responsive to present needs.