Time domain (TD) diffuse optical measurement systems are being applied to neuroimaging, where they can detect hemodynamics changes associated with cerebral activity. We show that TD systems can provide better depth sensitivity than the more traditional continuous wave (CW) systems by gating late photons, which carry information about deep layers of the brain, and rejecting early light, which is sensitive to the superficial physiological signal clutter. We use an analytical model to estimate the contrast due to an activated region of the brain, the instrumental noise of the systems, and the background signal resulting from superficial physiological signal clutter. We study the contrast-to-noise ratio and the contrast-to-background ratio as a function of the activation depth and of the source-detector separation. We then present experimental results obtained with a time-gated instrument on the motor cortex during finger-tapping exercises. Both the model and the experimental results show a similar contrast-to-noise ratio for CW and TD, but that estimation of the contrast is experimentally limited by background fluctuations and that a better contrast-to-background ratio is obtained in the TD case. Finally, we use the time-gated measurements to resolve in depth the brain activation during the motor stimulus. Copyright 2005 Society of Photo-Optical Instrumentation Engineers