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We investigate the effect of tissue heterogeneity and anisotropy on the electric field and current density distribution induced in the brain during magnetic stimulation. Validation of the finite-element (FE) calculations in a homogeneous isotropic sphere showed that the magnitude of the total electric field can be calculated to within an error of approximately 5% in the region of interest, even in the presence of a significant surface charge contribution. We used a high conductivity inclusion within a sphere of lower conductivity to simulate a lesion due to an infarct. Its effect is to increase the electric field induced in the surrounding low conductivity region. This boost is greatest in the vicinity of interfaces that lie perpendicular to the current flow. For physiological values of the conductivity distribution, it can reach a factor of 1.6 and extend many millimeters from the interface. We also show that anisotropy can significantly alter the electric field and current density distributions. Either heterogeneity or anisotropy can introduce a radial electric field component, not present in a homogeneous isotropic conductor. Heterogeneity and anisotropy are predicted to significantly affect the distribution of the electric field induced in the brain. It is, therefore, expected that anatomically faithful FE models of individual brains which incorporate conductivity tensor data derived from diffusion tensor measurements, will provide a better understanding of the location of possible stimulation sites in the brain.