Diffusion tensor imaging (DTI) has been proposed as a sensitive biomarker of traumatic white matter injury, which could potentially serve as a tool for prognostic assessment and for studying microstructural changes during recovery from traumatic brain injury (TBI). However, there is a lack of longitudinal studies on TBI that follow DTI changes over time and correlate findings with long-term clinical outcome. We performed a prospective longitudinal study of 30 adult patients admitted for subacute rehabilitation following severe traumatic brain injury. DTI and conventional MRI were acquired at mean 8 weeks (5–11 weeks), and repeated in 23 of the patients at mean 12 months (9–15 months) post-trauma. Using a region-of-interest-based approach, DTI parameters were compared to those of healthy matched controls, scanned during the same time period and rescanned with a similar interval as that of patients. At the initial scan, fractional anisotropy was reduced in all the investigated white matter regions in patients compared to controls (P ≤ 0.01) due to decreased diffusivity parallel (λ∥) and increased diffusivity perpendicular (λ⊥) to axonal fibre direction. Fractional anisotropy in the cerebral peduncle correlated with ∼1 year Glasgow outcome scale score (r = 0.60, P<0.001) and in this sample predicted dichotomized outcome with 76% accuracy when taken alone, and with 100% accuracy in combination with clinical evaluation by functional independence measure at the time of the first scan. At follow-up DTI, fractional anisotropy in patients had increased in the internal capsule and in centrum semiovale (P ≤ 0.01) due to an interval increase of λ∥ with unchanged λ⊥. In these regions, fractional anisotropy and λ∥ reached normal or supranormal levels, primarily in patients with favourable outcome. In the cerebral peduncle and in corpus callosum, λ∥ and λ⊥ both increased during the scan interval and, particularly in patients with unfavourable outcome, fractional anisotropy remained depressed. No significant DTI parameter changes over time were found in controls, or in CSF of patients. These findings support that DTI is a clinically relevant biomarker in TBI, which may have prognostic value and also might serve as a tool for revealing changes in the neural tissue during recovery.