The study aimed to determine the impact of intraoperative lateral laxity at extension on clinical and functional outcomes 1 year after posterior-stabilised total knee arthroplasty (PS-TKA). In total, 91 varus-type osteoarthritic knees that underwent PS-TKA using the medial preservation gap technique were included. After the femoral trial component placement and patellofemoral joint reduction, the soft-tissue balance was assessed using an offset-type tensor with a 40-lb joint-distraction force. Patients were divided into the following three groups according to the intraoperative lateral laxity at extension (i.e., varus ligament balance) using the mean ± 1 standard deviation: Groups A, ≤0°; B, 0-4°; and C, >4°. The 2011 Knee Society Score (KSS) and 3-m timed up-and-go test (TUG) time 1-year postoperatively, and their improvements were compared among the groups. While significant improvements were observed in all subscales of the 2011 KSS and TUG post-TKA (p < 0.05), the improvement of functional activities and TUG time were significantly lower in Group C than in Group B (p < 0.05). However, no significant differences were observed in symptom improvement, patient satisfaction or patient expectation scores among the groups. An excessive lateral laxity (varus angle) >4° at extension was associated with lower improvement in functional ability 1-year postoperatively. Therefore, excessive intraoperative lateral laxity should be avoided in PS-TKA. Level IV.