Cognitive impairment is a major contributor to the burden in Parkinson's disease and dementia with Lewy bodies, both of which make up the Lewy body disease spectrum, with dementia affecting up to 80% of patients over the course of the disease. Macroatrophy and microstructural neurodegenerative alterations are typically assessed separately in MRI, although neuropathologically they represent the same mechanism - the loss of functional tissue. To gain a deeper insight into the differential impact of neurodegeneration in the basal forebrain and hippocampus on cognition, we have developed a combined volumetric-mesoscopic approach to more comprehensively quantify the extent of neurodegeneration. This approach might facilitate a more profound understanding of cognitive decline. We report a retrospective analysis of MRI data from 147 patients with Lewy body disease (Parkinson's disease with normal cognition=50, with mild cognitive impairment=59, with dementia=25 and 13 patients with dementia with Lewy bodies) and 30 healthy controls. Neurodegeneration of the basal forebrain and hippocampus was quantified by assessing the total macrostructural volume and microstructural metrics. Additionally, these parameters were combined to evaluate the potential of the functional volume for capturing the coinciding pathophysiological processes. The extent of neurodegeneration was compared between healthy controls, patients with normal cognition, mild impaired cognition, and dementia. Furthermore, the integrity of the basal forebrain and hippocampus was tested for associations with subdomains of cognitive performance as assessed with the Mattis Dementia Rating Scale 2. Our results revealed significant macro- and microstructural degeneration in the basal forebrain and hippocampus in patients with Parkinson's disease dementia and dementia with Lewy bodies when compared to healthy controls or Lewy body disease without dementia. Combining volumetric and microstructural metrics to calculate the functional volume provided the strongest effects across cognitive function in Lewy body disease. Moreover, in a combined model of basal forebrain and hippocampus, degeneration of the basal forebrain only was significantly associated with impaired initiation (p=0.003) and trend-level linked to attention (p=0.06), whereas hippocampal integrity significantly determined memory (p=0.005) and conceptualization at trend level (p=0.06). Combining macro- and microstructural techniques to investigate the functional volume of the basal forebrain and hippocampus revealed that basal forebrain and hippocampal integrity is altered only in LBD with dementia but not in LBD with normal cognition or mild cognitive impairment. Moreover, the basal forebrain and hippocampus were differentially associated with distinct neurocognitive domains, thus providing an intriguing biomarker for neurocognitive staging in LBD or individualized treatment concepts.