<jats:p> The skeletal muscle contains lipids inside (intramyocellular lipids, IMCL) or outside (extramyocellular lipids, EMCL) its cells. The muscle lipid content increases with age; however, the characteristics of IMCL and EMCL in older individuals are not well known. We aimed to examine the characteristics of skeletal muscle lipids by investigating their relationship with muscle function and physical functions. Seven elderly men and 16 elderly women participated. The skeletal muscle lipid content, including IMCL and EMCL, was measured in the vastus lateralis by proton magnetic resonance spectroscopy. Isometric knee extension with maximal voluntary contraction (MVC) and time-to-task failure for knee extension with 50% MVC were measured as muscle functions. The participants performed six physical function tests: preferred gait speed, maximal gait speed, Timed Up and Go, chair sit-to-stand, handgrip strength, and stand from the floor. The time to knee extension task failure had a significant relationship with the IMCL ( r<jats:sub>s</jats:sub> = −0.43, P < 0.05), but not with the EMCL content. Significant relationships were confirmed in the EMCL content with the sit-to-stand ( r<jats:sub>s</jats:sub> = −0.48, P < 0.05) and stand-from-the-floor ( r<jats:sub>s</jats:sub> = 0.53, P < 0.05) tests. These findings indicated that muscle lipids are associated with muscle and physical functional performances in older individuals. </jats:p><jats:p> Novelty: No relationship was confirmed between IMCL and EMCL in older individuals. Muscle endurance performance had a relationship with IMCL, but not with EMCL. Relationships between EMCL and physical functional tests (e.g., sit-to-stand and stand from the floor) were confirmed. </jats:p>