BACKGROUND: Mixed vascular and neurodegenerative dementia, such as Alzheimer’s disease (AD) with concomitant cerebrovascular disease, has emerged as the leading cause of age-related cognitive impairment. The brain white matter (WM) microstructural changes in neurodegeneration well-documented by diffusion tensor imaging (DTI) can originate from brain tissue or extracellular free water changes. The differential microstructural and free water changes in AD with and without cerebrovascular disease, especially in normal-appearing WM, remain largely unknown. To cover these gaps, we aimed to characterize the WM free water and tissue microstructural changes in AD and mixed dementia as well as their associations with cognition using a novel free water imaging method. METHODS: We compared WM free water and free water-corrected DTI measures as well as white matter hyperintensity (WMH) in patients with AD with and without cerebrovascular disease, patients with vascular dementia, and age-matched healthy control subjects. RESULTS: The cerebrovascular disease groups had higher free water than the non-cerebrovascular disease groups. Importantly, besides the cerebrovascular disease groups, patients with AD without cerebrovascular disease also had increased free water in normal-appearing WM compared with healthy control subjects, reflecting mild vascular damage. Such free water increases in WM or normal-appearing WM (but not WMH) contributed to dementia severity. Whole-brain voxel-wise analysis revealed a close association between widespread free water increases and poorer attention, executive functioning, visual construction, and motor performance, whereas only left hemispheric free water increases were related to language deficits. Moreover, compared with the original DTI metrics, the free water-corrected DTI metric revealed tissue damage-specific (frontal and occipital) microstructural differences between the cerebrovascular disease and non-cerebrovascular disease groups. In contrast to both lobar and subcortical/brainstem free water increases, only focal lobar microstructural damage was associated with poorer cognitive performance. CONCLUSIONS: Our findings suggest that free water analysis isolates probable mild vascular damage from WM microstructural alterations and underscore the importance of normal-appearing WM changes underlying cognitive and functional impairment in AD with and without cerebrovascular disease. Further developed, the combined free water and tissue neuroimaging assays could help in differential diagnosis, treatment planning, and disease monitoring of patients with mixed dementia.