Severe traumatic brain injury (TBI) often leads to deficits in physiological arousal and empathy, which are thought to be linked. This study examined whether injury-related brain volume loss in key limbic system structures is associated with these deficits. Twenty-four adults with TBI and 24 matched Controls underwent MRI scans to establish grey matter volumes in the amygdala, thalamus, and hippocampus. EEG and skin conductance levels were recorded to index basal physiological arousal. Self-report emotional empathy levels were also assessed. The TBI group had reduced brain volumes, topographic alpha differences, and lower emotional empathy compared to Controls. Regional brain volumes were differentially correlated to arousal and self-report empathy. Importantly, lower volume in pertinent brain structures correlated with lower empathy, for participants with and without TBI. Overall we provide new insights into empathic processes after TBI and their relationship to brain volume loss.