Postural tremor is the leading symptom in essential tremor, but in some cases intention tremor and limb ataxia emerge and can become highly disabling features. Deep brain stimulation of the thalamus or subthalamic white matter improve tremor and ataxia; however, the underlying network mechanisms are enigmatic. To elucidate the mechanisms of deep brain stimulation in essential tremor, we pursued a multimodal approach combining kinematic measures of reach-to-grasp movements, clinical assessments, physiological measures of neuronal excitability and probabilistic tractography from diffusion tensor imaging. Seven patients with essential tremor (age 62.9 ± 10.3 years, two females) received thalamic deep brain stimulation and a clinical examination of severity of limb tremor and ataxia at off stimulation, using therapeutic and supratherapeutic stimulation parameters. A reach-to-grasp task based on acoustic cues was also performed. To examine the electrical properties of target structures, we determined the chronaxie of neural elements modulated. A control group of 13 healthy subjects (age 56 ± 7.6 years, five females) underwent whole-brain diffusion tensor imaging at 3 T. Probabilistic tractography was applied in healthy subjects from seeds in cerebellum and midbrain to reconstruct the connectivity pattern of the subthalamic area. The positions of stimulation electrodes in patients were transferred into probability maps and connectivity values were correlated to clinical outcome measures. Therapeutic stimulation improved ataxia and tremor mainly during the target period of the reaching paradigm (63% reduction compared with off stimulation). Notably the acceleration (29%) and deceleration periods (41%) were improved. By contrast, supratherapeutic stimulation worsened ataxia during the deceleration period with a 55% increase of spatial variability, while maintaining near complete suppression of tremor. Chronaxie measures were in the range of rapidly-conducting myelinated fibres with significantly different values for the anti-tremor effect of therapeutic stimulation (27 s) and the pro-ataxic effect of supratherapeutic stimulation (52 s). The degree of connectivity to the dentato-thalamic tract at the stimulating electrode correlated significantly with the reduction of tremor in the therapeutic condition. Our data suggest that stimulation induced tremor reduction and induction of ataxia by supratherapeutic stimulation are mediated by different fibre systems. Probalistic tractography identified the dentato-thalamic tract as a likely target of tremor suppression. Stimulation-induced ataxia may be caused by additional recruitment of adjacent fibre systems at higher amplitudes. Stimulation with short pulse duration may help to increase the therapeutic window and focus on the anti-tremor effect.