To compare the findings on magnetic resonance (MR) images of the knee obtained with a three-dimensional gradient-echo (GRE) sequence with findings at arthroscopy, the menisci, cruciate ligaments, and hyaline cartilage were assessed in 100 patients. At MR imaging (performed by means of fast imaging with steady-state precession) and arthroscopy, the menisci (n = 200) and areas of hyaline cartilage (n = 500) were assigned grades of zero (normal) to three (greatest abnormality). The cruciate ligaments were considered intact, partially torn, or completely torn. The sensitivity of MR imaging in diagnosis of meniscal tears seen at arthroscopy was 97% and the specificity, 94%. For complete tears of the anterior cruciate ligament, the sensitivity was 92% and specificity, 96%. In the posterior cruciate ligament, both the sensitivity and specificity were 100%. Good correlation existed between findings at MR imaging and those at arthroscopy in assessment of focal thinning and full-thickness loss of hyaline cartilage, but arthroscopy enabled superior visualization of minor fissuring. Three-dimensional GRE MR imaging enables accurate assessment of the articular cartilage of the knee. The evaluation of meniscal tears and the cruciate ligaments has a high negative predictive value.