The aim of this study was to examine the physical function and muscle strength of children on peritoneal dialysis (PD) and to assess whether the muscle structure alterations influence physical function and muscle strength in these children. Twenty-two children on PD and 16 healthy children were enrolled into the study. A 6-min walk distance and gait speed tests were used to evaluate physical performance. Quadriceps muscle strength (QMS) was measured with a hand-held dynamometer. Magnetic resonance imaging was used to determine the cross-sectional area (CSA) and T2 signal intensity of the quadriceps muscle. Significant differences in the performance of these functional tests were found between PD patients and controls. Quadriceps muscle strength was significantly lower in PD patients than in controls. The CSA corrected for the body mass index (CSA/BMI) was not different between groups, whereas T2 signal intensity was significantly higher in PD patients than in the controls. Physical functioning tests and QMS had a close relationship with muscle CSA/BMI and with T2 signal intensity. In conclusion, along with the other previously documented mechanisms, increased fat in muscles may contribute to the decreased physical functioning and muscle strength in PD patients.