This paper examines non-invasive methods for absolute determination of the hemoglobin content of arterial blood and the water content of skin. Both methods are based on diffuse reflectance spectrophotometry in the near-infrared band (800 - 1600 nm). Separation of blood and background tissue spectra is accomplished by a technique similar to pulse oximetry, with the added feature that the set of measurement wavelengths is chosen to be sensitive to both hemoglobin and water concentration in the blood. Regressions performed on a simulated tissue spectra suggest that {1060, 1160, 1200 and 1320 nm} is an optimal set of wavelengths for measurement of tissue hydration and {1040, 1120, 1140 and 1200 nm} is an optimal set of wavelengths for measurement of hemoglobin content under typical measurement conditions. A simple in vitro tissue phantom whose optical properties can be altered in a controlled manner was developed to test the feasibility of the methods. Measurements were made with a custom-designed NIR spectrophotometer.