We present functional imaging of the concentration of a photodynamic therapy (PDT)-related dye in scattering tissue phantoms based on spatially resolved measurements of optical properties through spectroscopic optical coherence tomography (OCT). Expressions for the OCT signal are developed, enabling estimation of depth-resolved sample optical properties. Based on these expressions, we discuss speckle statistics and speckle correlations of the OCT signal. Speckle noise reduction is performed by spatial filtering and is used to improve accuracy in the estimated optical properties at the expense of spatial resolution. An analytic expression for the precision in the estimated optical properties is derived. This expression shows that axial filtering, and thereby a reduction of axial resolution, gives a larger improvement in precision compared to the same filtering and reduction in the transversal resolution. It also shows that imaging with a shorter coherence length, or a larger numerical aperture, improves precision when the filter length determines the spatial resolution. Good agreement is obtained between experimentally determined and theoretically predicted variance in the estimated attenuation coefficients and dye concentration. Finally, we present guidelines for spectroscopic OCT systems for concentration imaging and discuss application of the method to more realistic phantoms and tissue. © 2005 Society of Photo-Optical Instrumentation Engineers.