Cerebral small vessel disease (SVD) causes focal lacunar infarction and more diffuse ischaemia, referred to as leukoaraiosis. Endothelial dysfunction has been proposed as a causal mechanism in the disease. Homocysteine is toxic to endothelium. We determined whether elevated homocysteine levels and the methylene tetrahydrofolate reductase (MTHFR) C677T polymorphism are risk factors for SVD as a whole, and for two different SVD subtypes: isolated lacunar infarction and ischaemic leukoaraiosis. We also determined whether any association was mediated by endothelial dysfunction, as assessed by circulating endothelial markers. One hundred and seventy-two Caucasian patients with SVD and 172 community controls of similar age and sex were studied. Serum homocysteine measurement and MTHFR genotyping was performed. Levels of intercellular adhesion molecule 1 (ICAM1) and thrombomodulin were measured in a subgroup. Mean homocysteine levels were higher in SVD than controls [14.55 micromol/l [95% confidence interval (CI) 13.78-15.35] versus 12.01 micromol/l (95% CI 11.42-12.64), P < 0.0005]. Homocysteine was a stronger risk factor in those with ischaemic leukoaraiosis [12.92 (95% CI 4.40-37.98), P < 0.0005) per micromol increase in log homocysteine concentration (P < 0.0005)] in comparison with isolated lacunar infarction [4.22 (95% CI 1.29-13.73), P = 0.02] after controlling for both conventional risk factors and age. The MTHFR 677T allele was a risk factor only in the ischaemic leukoaraiosis group [odds ratio (OR) 2.02 (95% CI 1.31-3.1), P = 0.001]. Inclusion of the endothelial markers ICAM1 and thrombomodulin in a logistic regression model resulted in the association between homocysteine and SVD no longer being significant. In conclusion, hyperhomocysteinaemia is an independent risk factor for SVD, particularly ischaemic leukoaraiosis, and this effect may be mediated via endothelial dysfunction. Homocysteine-lowering therapy may be particularly effective in this subgroup.