Clinical trial design in amyotrophic lateral sclerosis (ALS) remains hampered by a lack of reliable and sensitive biomarkers of disease progression. The present study evaluated peripheral nerve diffusion tensor imaging (DTI) as a surrogate marker of axonal degeneration in ALS. Longitudinal studies were undertaken in 21 ALS patients studied at 0 and 3 months, and 19 patients at 0, 3 and 6 months, with results compared to 13 age-matched controls. Imaging metrics were correlated across a range of functional assessments including amyotrophic lateral sclerosis functional rating scale revised (ALSFRS-R), lower limb muscle strength (Medical Research Council sum score, MRCSS-LL), compound muscle action potential amplitudes and motor unit number estimation (MUNE). Fractional anisotropy was reduced at baseline in ALS patients in the tibial (p < 0.05), and peroneal nerve (p < 0.05). Fractional anisotropy and axial diffusivity declined in the tibial nerve between baselines, 3- and 6-month scans (p < 0.01). From a functional perspective, ALSFRS-R correlated with fractional anisotropy values from tibial (R = 0.75, p < 0.001) and peroneal nerves (R = 0.52, p = 0.001). Similarly, peroneal nerve MUNE values correlated with fractional anisotropy values from the tibial (R = 0.48, p = 0.002) and peroneal nerve (R = 0.39, p = 0.01). There were correlations between the change in ALSFRS-R and tibial nerve axial diffusivity (R = 0.38, p = 0.02) and the change in MRCSS-LL and peroneal nerve fractional anisotropy (R = 0.44, p = 0.009). In conclusion, this study has demonstrated that some peripheral nerve DTI metrics are sensitive to axonal degeneration in ALS. Further, that DTI metrics correlated with measures of functional disability, strength and neurophysiological measures of lower motor neuron loss.