Optic nerve dysfunction in thyroid eye disease is thought to be due to compression of the optic nerve by enlarged extraocular muscles near the orbital apex. High-resolution computed tomography (CT) scans of 78 orbits of 31 patients with thyroid eye disease were reviewed. Axial scans alone were inadequate for demonstrating compression of the optic nerve. With a coronal reformatted scan from the axial scans, a muscular index was devised and measured to reflect extraocular muscle impingement on the optic nerve. Orbits with optic nerve dysfunction had significantly higher muscular indices than those without optic nerve dysfunction, supporting the hypothesis that optic nerve dysfunction is usually secondary to compression by enlarged extraocular muscles. Muscular indices of 67% or greater in patients with optic nerve dysfunction were diagnostic of compressive optic neuropathy, while muscular indices of less than 50% appeared to exclude optic nerve compression. A single case of optic nerve dysfunction without muscular compression is also discussed.