Children with type 1 diabetes (T1D) experience an increased risk of fracture, which may be related to altered bone development. We aimed to assess differences in bone, muscle and physical activity (PA), and explore if better muscle and PA measures would mitigate bone differences between children and adolescents with T1D and typically developing peers (TDP). We matched 56 children and adolescents with T1D (mean age 11.9 yrs) and 56 TDP (11.5 yrs) by sex and maturity from 171 participants with T1D and 66 TDP (6-17 yrs). We assessed the distal radius and tibia with high-resolution peripheral quantitative computed tomography (HR-pQCT), and the radius and tibia shaft bone and muscle with pQCT. We also measured muscle function from force-related measures in neuromuscular performance tests (push-up, grip test, countermovement and long jump). We compared PA based on questionnaire scores and accelerometers between groups. Bone, muscle, and neuromuscular performance measures were compared using MANOVA. We used mediation to explore the role of PA and muscle in bone differences. Children and adolescents with T1D had 6–10 % lower trabecular density, bone volume fraction, thickness and number at both distal radius and tibia, and 11 % higher trabecular separation at the distal radius than TDP. They also had 3–16 % higher cortical and tissue mineral density, and cortical thickness at the distal radius, 5–7 % higher cortical density and 1–3 % higher muscle density at both shaft sites compared to TDP. PA mediated the between-group difference in trabecular number (indirect effect −0.04) at the distal radius. Children and adolescents with T1D had lower trabecular bone density and deficits in trabecular micro-architecture, but higher cortical bone density and thickness at the radius and tibia compared to TDP. They engaged in less PA but had comparable muscle measures to those of TDP. PA participation may assist in mitigating deficit in trabecular number observed in children and adolescents with T1D. •Children with T1D had lower trabecular density, micro-architecture at distal sites.•Higher cortical density and thickness at distal radius and shaft sites in T1D•More physical activity may mitigate trabecular bone difference in T1D.•Prospective, advanced imaging data of bone development in children with T1D needed.