The objectives are to evaluate role of magnetic resonance imaging (MRI) in diagnosis of cholesteatoma and correlate imaging findings with intraoperative findings, and to emphasize of role of imaging in the follow-up of postoperative patients for differentiating residual/recurrent cholesteatoma from granulation/inflammatory tissue. In this prospective study, 31 patients were evaluated with a specific MRI protocol and high resolution computed tomography of the temporal bones. These included patients with a strong suspicion of having a cholesteatoma on clinical examination and postoperative cases on clinical follow up. Based on specific MRI findings, presence of cholesteatoma was reported in 17 out of 31 patients. All 31 patients underwent surgery and 19 patients had confirmed intraoperative cholesteatoma. This study shows high sensitivity of a specific sequence based MRI examination in detection of cholesteatoma and in differentiating cholesteatoma from postoperative inflammatory/granulation tissue. To the best of the author's knowledge, this is the first such study performed in the Indian Asian population.