A model of MRI signal intensity which is a function of perfusion is developed based upon the assumption that biological tissue can be represented by a blood and tissue compartment. The longitudinal magnetization is derived from the Bloch equations which are modified to model the magnetization in both the blood and tissue as a function of the following physiological parameters: blood flow velocity; perfusion fraction, which in the model is parameterized in terms of the ratio of the cross-sectional areas of the tissue and blood compartments; diffusion; rate of exchange between the blood and extravascular tissue compartments. Simulations of slice profiles excited by a repetitive sequence of 90 degrees slice-selective pulses show that the signal intensity in the blood and tissue compartments are modulated by the physiological parameters. A key factor in the modulation of the MRI signal is a time-of-flight effect whereby unexcited spins perfuse the excited region and exchange with blood and tissue compartments, thus immediately increasing the slice signal intensity but also delaying the spin exits from the slice, thereby decreasing their contribution to slice signal intensity in future repetitive pulse measurements.