Purpose: Magnetic particle imaging (MPI) is a new imaging technology that directly detects superparamagnetic iron oxide nanoparticles. The technique has potential medical applications in angiography, cell tracking, and cancer detection. In this paper, the authors explore how nanoparticle relaxation affects image resolution. Historically, researchers have analyzed nanoparticle behavior by studying the time constant of the nanoparticle physical rotation. In contrast, in this paper, the authors focus instead on how the time constant of nanoparticle rotation affects the final image resolution, and this reveals nonobvious conclusions for tailoring MPI imaging parameters for optimal spatial resolution. Methods: The authors first extend x-space systems theory to include nanoparticle relaxation. The authors then measure the spatial resolution and relative signal levels in an MPI relaxometer and a 3D MPI imager at multiple drive field amplitudes and frequencies. Finally, these image measurements are used to estimate relaxation times and nanoparticle phase lags.Results: The authors demonstrate that spatial resolution, as measured by full-width at half-maximum, improves at lower drive field amplitudes. The authors further determine that relaxation in MPI can be approximated as a frequency-independent phase lag. These results enable the authors to accurately predict MPI resolution and sensitivity across a wide range of drive field amplitudes and frequencies. Conclusions: To balance resolution, signal-to-noise ratio, specific absorption rate, and magnetostimulation requirements, the drive field can be a low amplitude and high frequency. Continued research into how the MPI drive field affects relaxation and its adverse effects will be crucial for developing new nanoparticles tailored to the unique physics of MPI. Moreover, this theory informs researchers how to design scanning sequences to minimize relaxation-induced blurring for better spatial resolution or to exploit relaxation-induced blurring for MPI with molecular contrast. C 2016 American Association of Physicists in Medicine. [http://dx