Background: Diagnostic evaluation of rotator cuff muscle quality is important to determine indications for potential operative repair. Ultrasonography has developed into an accepted and useful tool for evaluating rotator cuff tendon tears; however, its use for evaluating rotator muscle quality has not been well established. The purpose of this study was to investigate the diagnostic performance and observer reliability of ultrasonography in grading fatty degeneration of the posterior and superior rotator cuff muscles. Methods: The supraspinatus, infraspinatus, and teres minor muscles were prospectively evaluated with magnetic resonance imaging (MRI) and ultrasonography in eighty patients with shoulder pain. The degree of fatty degeneration on MRI was graded by four independent raters on the basis of themodified Goutallier grading system. Ultrasonographic evaluation of fatty degeneration was performed by one of three radiologists with use of a three-point scale. The two scoring systems were compared to determine the diagnostic performance of ultrasonography. The interobserver and intraobserver reliability of MRI grading by the four raters were determined. The interobserver reliability of ultrasonography among the three radiologists was determined in a separate group of thirty study subjects. The weighted Cohen kappa, percentage agreement, sensitivity, and specificity were calculated. Results: The accuracy of ultrasonography for the detection of fatty degeneration, as assessed on the basis of the percentage agreement with MRI, was 92.5% for the supraspinatus and infraspinatus muscles and 87.5% for the teres minor. The sensitivity was 84.6% for the supraspinatus, 95.6% for the infraspinatus, and 87.5% for the teres minor. The specificity was 96.3% for the supraspinatus, 91.2% for the infraspinatus, and 87.5% for the teres minor. The agreement between MRI and ultrasonography was substantial for the supraspinatus and infraspinatus (kappa = 0.78 and 0.71, respectively) and moderate for the teres minor (kappa = 0.47). The interobserver reliability for MRI was substantial for the supraspinatus and infraspinatus (kappa = 0.76 and 0.77, respectively) and moderate for the teres minor (kappa = 0.59). For ultrasonography, the interobserver reliability was substantial for all three muscles (kappa = 0.71 for the supraspinatus, 0.65 for the infraspinatus, and 0.72 for the teres minor). Conclusions: The diagnostic performance of ultrasonography in identifying and grading fatty degeneration of the rotator cuff muscles was comparable with that of MRI. Ultrasonography can be used as the primary diagnostic imaging modality for fatty changes in rotator cuff muscles. Level of Evidence: Diagnostic Level II. See Instructions for Authors for a complete description of levels of evidence.