Background: Accurate prediction of motor recovery and functional outcome is difficult, but it is important for proper rehabilitative planning and poststroke care. Infarct location may be more important for some patients in determining eventual clinical outcome. Objectives: To study the functional outcome of ischemic stroke in relation to the site of lesion. Materials and Methods: A prospective cohort study was conducted in the Department of Physical Medicine and Rehabilitation, Regional Institute of Medical Sciences, Imphal, Manipur. All computed tomography confirmed ischemic stroke patients attending the outpatient department within 7 days of stroke onset were included in the study. Functional Independence Measure (FIM) scoring was done on 7, 30, and 90 days poststroke. Site was categorized as cortical (C), subcortical (S), combined cortical and subcortical (CS), basal ganglia (BG), or combined cortical, subcortical, and BG. Results: Ninety patients with mean age of 58.26 ± 7.021 years in the range of 45–70 years were studied. Males constituted 55.6% of the total participants. The site of lesion was in BG in majority of cases 37 (41.1%), subcortical in 31 (34.4%) cases, and cortical in 20 (22.2%) cases. Mean FIM score was highest 53.70 (±13.2) when the site of lesion was in BG. The mean FIM scores differed significantly between the different sites of lesion (P = 0.000) at subsequent follow-up examinations. Post hoc test further revealed that there was statistically significant differences in the FIM scores between BG and all the other sites of lesion at baseline and at subsequent follow-up. Conclusion: Site of lesion influenced the functional outcome significantly early on and at 30 days and 90 days after stroke, and the most favorable outcome was observed when the site of lesion was in BG.