Purpose. People with obesity, diabetes, and peripheral neuropathy have high levels of intermuscular adipose tissue (IMAT) volume which has been inversely related to physical function. We determined if IMAT is muscle specific, if calf IMAT is different between a healthy obese group (HO), a group with diabetes mellitus (D), and a group with diabetes mellitus and peripheral neuropathy (DN), and if IMAT volume or the ratio of IMAT/muscle volume is related to physical function in these groups. Methods. 10 healthy obese people, 11 with type 2 diabetes, 24 with diabetes and peripheral neuropathy, had assessments of muscle morphology, physical function and muscle performance. Results. The gastrocnemius muscle had a higher ratio of IMAT/muscle volume than any other muscle or compartment. There were no differences between groups in calf muscle or IMAT volumes. Calf IMAT was inversely related to physical performance on the 6-minute walk test (r = -0.47) and physical performance test (r = -0.36). IMAT/muscle volume was inversely related to physical performance (PPT, r = -0.44; 6 MW r = -0.48; stair power, r = -0.30). Conclusions. IMAT accumulation varies in calf muscles, is highest in the gastrocnemius muscle, and is associated with poor physical performance.