The corticospinal tract is the most intensively investigated tract of the human motor system in stroke rehabilitative research. Diffusion-tensor-imaging gives insights into its microstructure, and transcranial magnetic stimulation assesses its excitability. Previous data on the interrelationship between both measures are contradictory. Correlative or predictive models which associate them with motor outcome are incomplete. Free water correction has been developed to enhance diffusion-tensor-imaging by eliminating partial volume with extracellular water, which could improve capturing stroke-related microstructural alterations, thereby also improving structure-function relationships in clinical cohorts. In the present cross-sectional study, data of 18 chronic stroke patients and 17 healthy controls, taken from a previous study on cortico-cerebellar motor tracts, were re-analysed: The data included diffusion-tensor-imaging data quantifying corticospinal tract microstructure with and without free water correction, transcranial magnetic stimulation data assessing recruitment curve properties of motor evoked potentials and detailed clinical data. Linear regression modelling was used to interrelate corticospinal tract microstructure, recruitment curves properties and clinical scores. The main finding of the present study was that free water correction substantially strengthens structure-function associations in stroke patients: Specifically, our data evidenced a significant association between fractional anisotropy of the ipsilesional corticospinal tract and its excitability ( = 0.001, adj. = 0.54), with free water correction explaining additional 20% in recruitment curve variability. For clinical scores, only free water correction leads to the reliable detection of significant correlations between ipsilesional corticospinal tract fractional anisotropy and residual grip ( = 0.001, adj. = 0.70) and pinch force ( < 0.001, adj. = 0.72). Finally, multimodal models can be improved by free water correction as well. This study evidences that corticospinal tract microstructure directly relates to its excitability in stroke patients. It also shows that unexplained variance in motor outcome is considerably reduced by free water correction arguing that it might serve as a powerful tool to improve existing models of structure-function associations and potentially also outcome prediction after stroke.