Although experimental evidence now indicates that diffusion of hydrogen can influence the measured clearance curves from which local blood flow is inferred, its exact role has not yet been well defined. For this reason we have developed a theoretical treatment of the effects of diffusion near a boundary separating regions of inhomogeneous perfusion (e.g. the gray-matter interface), and reexamined the appropriateness of the currently used bi-exponential model. Using our model, we confirmed empirical estimates of important diffusion effects up to approximately 2 mm from an inhomogeneity, and further refined the concept of spatial resolution. We also showed that fitting data to bi-exponential curves may be incorrect and lead to inaccurate results. We conclude from these studies that diffusion does indeed have an important effect on the clearance curves measured near an inhomogeneity.