BACKGROUND: The presence of concomitant sarcopenia and obesity in sarcopenic obesity (SO) confers worse functional, morbidity and mortality outcomes compared to either alone. Excess adiposity and central redistribution of fats are associated with systemic inflammation and ectopic tissue fat infiltration in forms of Intermuscular adipose tissue (IMAT). Our study examines the profile of IMAT across a spectrum of body compositions and associations with physical performance and inflammatory biomarkers including Monocyte Chemoattractant Protein-1 (MCP-1), a novel biomarker of adipose tissue inflammation. METHODS: 187 community dwelling elderly participants were recruited and classified into 4 subgroups: normal, obese, sarcopenia and SO, using validated criteria for sarcopenia and waist circumference to define central obesity. We performed magnetic resonance imaging of mid-thigh sections to segment IMAT and muscle. Participants were assessed for muscle strength, physical performance and blood inflammatory biomarkers of interleukin-6, C-Reactive Protein and MCP-1. We examined correlation of IMAT(ratio) with muscle function measures and blood biomarkers. Multiple regression analyses were used to examine the association of body composition types and IMAT(ratio) with muscle function. RESULTS: IMAT(ratio) was highest in SO and obese groups. Overall, higher IMAT(ratio) is significantly associated with raised MCP-1, lower gait speed and muscle strength. SO had lowest scores in Short Physical Performance Battery (SPPB), gait speed, hand-grip and knee extension strength. IMAT(ratio) is independently associated with SPPB and handgrip strength, whilst SO is independently associated with muscle strength. CONCLUSION: Our results suggest the possible role of IMAT as a candidate imaging biomarker for adipose tissue inflammation and associated poorer functional outcomes in SO.