Objectives. To determine (1) whether intramuscular adipose tissue (IntraMAT) differs between women with and without type 2 diabetes and (2) the association between IntraMAT and mobility and strength.Methods. 59 women ≥ 65 years with and without type 2 diabetes were included. A 1-Tesla MRI was used to acquire images of the leg. Timed-up-and-go (TUG) and grip strength were measured. Regression was used to determine associations between the following: (1) type 2 diabetes and IntraMAT (covariates: age, ethnicity, BMI, waist : hip ratio, and energy expenditure), (2) IntraMAT and TUG (covariates: diabetes, age, BMI, and energy expenditure), and (3) IntraMAT and grip strength (covariates: diabetes, age, height, and lean mass).Results. Women with diabetes had more IntraMAT. After adjustment, IntraMAT was similar between groups (diabetes mean [SD] = 13.2 [1.4]%, controls 11.8 [1.3]%,). IntraMAT was related to TUG and grip strength, but the relationships became nonsignificant after adjustment for covariates (difference/percent IntraMAT [95% CI]: TUG = 0.041 seconds [−0.079–0.161],, grip strength = −0.144 kg [−0.335–0.066],).Conclusions. IntraMAT alone may not be a clinically important predictor of functional mobility and strength; however, whether losses in functional mobility and strength are promoted by IntraMAT accumulation should be explored.