Alzheimer's disease (AD) is associated with neuronal loss not only in the hippocampus and amygdala but also in the thalamus. Anterodorsal, centromedial, and pulvinar nuclei are the main sites of degeneration in AD. Here we combined shape analysis and diffusion tensor imaging (DTI) tractography to study degeneration in AD in the thalamus and its connections. Structural and diffusion tensor MRI scans were obtained from 16 AD patients and 22 demographically similar healthy volunteers. The thalamus, hippocampus, and amygdala were automatically segmented using our locally developed algorithm, and group comparisons were carried out for each surface vertex. We also employed probabilistic diffusion tractography to obtain connectivity measures between individual thalamic voxels and hippocampus/amygdala voxels and to segment the internal medullary lamina (IML). Shape analysis showed significant bilateral regional atrophy in the dorsal-medial part of the thalamus in AD patients compared to controls. Probabilistic tractography demonstrated that these regions are mainly connected with the hippocampus, temporal, and prefrontal cortex. Intrathalamic FA comparisons showed reductions in the anterodorsal region of thalamus. Intrathalamic tractography from this region revealed that the IML was significantly smaller in AD patients than in controls. We suggest that these changes can be attributed to the degeneration of the anterodorsal and intralaminar nuclei, respectively. In addition, based on previous neuropathological reports, ventral and dorsal-medial shape change in the thalamus in AD patients is likely to be driven by IML atrophy. This combined shape and connectivity analysis provides MRI evidence of regional thalamic degeneration in AD.