Increased varus-valgus laxity has been reported in individuals with knee osteoarthritis (OA) compared to controls. However, the majority of previous investigations may not report truly passive joint laxity, as their tests have been performed on conscious participants who could be guarding against motion with muscle contraction during laxity evaluation. The purpose of this study was to investigate how a measure of passive knee laxity, recorded when the participant is under anesthesia, is related to varus-valgus excursion during gait, clinical measures of performance, perceived instability, and self-reported function in participants with severe knee OA. We assessed passive varus-valgus knee laxity in 29 participants (30 knees) with severe OA, as they underwent total knee arthroplasty (TKA). Participants also completed gait analysis, clinical assessment of performance (6-min walk (6 MW), stair climbing test (SCT), isometric knee strength), and self-reported measures of function (perceived instability, Knee injury, and Osteoarthritis Outcome Score (KOOS) a median of 18 days before the TKA procedure. We observed that greater passive varus-valgus laxity was associated with greater varus-valgus excursion during gait (R2 = 0.34, p = 0.002). Significant associations were also observed between greater laxity and greater isometric knee extension strength (p = 0.014), farther 6 MW distance (p = 0.033) and shorter SCT time (p = 0.046). No relationship was observed between passive varus-valgus laxity and isometric knee flexion strength, perceived instability, or any KOOS subscale. The conflicting associations between laxity, frontal excursion during gait, and functional performance suggest a complex relationship between laxity and knee cartilage health, clinical performance, and self-reported function that merits further study. © 2016 Orthopaedic Research Society. Published by Wiley Periodicals, Inc. J Orthop Res 35:1644-1652, 2017.