To determine associations of inter- and intra-muscular adipose tissue (IMAT) with cardiometabolic health and physical function in older adults.48 community-dwelling older adults aged ⋝65 years (mean 71.6±4.8 years; 52% women) underwent whole-body dual-energy X-ray absorptiometry, to assess appendicular lean mass (ALM), and peripheral quantitative computed tomography (pQCT; 66% tibia), to assess calf IMAT cross-sectional area ([CSA]; cm2) and muscle density (mg/cm(3); higher values indicate lower fat infiltration). Fasting glucose, lipids, triglycerides and C-reactive protein (CRP) were analysed. Physical function was assessed by postural sway (computerised posturography; N=41), and gait analysis (GAITRite Electronic Walkway; N=40).Higher IMAT CSA and muscle density were associated with significantly higher (B=0.85 95%CI [0.34, 1.36]) and lower (-2.14 [-4.20, -0.08]) CRP and higher (0.93 [0.56, 1.30]) and lower postural sway (-3.12 [-4.74, -1.50]), respectively, after adjustment for age, sex and ALM/BMI. Higher IMAT CSA was associated with slower gait speed and cadence, and greater step time and step width (all P<0.03), while higher muscle density was associated with smaller step width (P<0.01) only.Older adults with higher calf IMAT have poorer balance, mobility and inflammatory status. Interventions aimed at improving physical function in older adults should incorporate strategies to reduce IMAT.