Abstract. Image-guided neurosurgery involves the display of MRIbased preoperative plans in an intraoperative reference frame. Interventional MRI (iMRI) can serve as a reference for non-rigid registration based propagation of preoperative MRI. Structural MRI images exhibit spatially varying intensity relationships, which can be captured by a local similarity measure such as the local normalized correlation coefficient (LNCC). However, LNCC weights local neighborhoods using a static spatial kernel and includes voxels from beyond a tissue or resection boundary in a neighborhood centered inside the boundary. We modify LNCC to use locally adaptive weighting inspired by bilateral filtering and evaluate it extensively in a numerical phantom study, a clinical iMRI study and a segmentation propagation study. The modified measure enables increased registration accuracy near tissue and resection boundaries.