The aim of this study was to evaluate the influence of body composition, especially distribution of body fat, and insulin resistance on nonalcoholic fatty liver disease (NAFLD) in obese children. One hundred obese children (66 boys, 34 girls) with (n=60) and without NAFLD (n=40) were assessed. Anthropometry, laboratory tests, abdominal ultrasonography, and dual energy x-ray absorption metry (DXA) were evaluated in all subjects. Subject age and measurements of liver enzymes, γ- glutamyl transpeptidase (γGT), uric acid, high-density lipoprotein cholesterol, and insulin resistance were significantly different between the non-NAFLD group and NAFLD group. Body fat and trunk fat percentage were significantly different between the two groups (p<0.001 and p=0.003), whereas extremity fat percentage was not (p=0.683). Insulin resistance correlated significantly with body fat and trunk fat percentages, age, liver enzymes, γGT, and uric acid in obese children. Multiple logistic regression analysis indicated that insulin resistance and trunk fat percentage significantly affected the development of NAFLD in obese children. Body fat, especially abdominal fat, influences the development of insulin resistance and subsequent NAFLD in obese children. Therefore, body composition measurement using DXA, in conjunction with biochemical tests, may be beneficial in evaluating obese children with NAFLD.