Exercise intolerance is the primary chronic symptom in heart failure with preserved ejection fraction (HFpEF), the most common form of heart failure in older patients; however its pathophysiology is not well understood. Recent data suggest that peripheral factors such as skeletal muscle (SM) dysfunction may be important contributors. Therefore, 38 participants, 23 patients with HFpEF (69 ± 7 years) and 15 age-matched healthy controls (HCs), underwent magnetic resonance imaging and cardiopulmonary exercise testing to assess for SM, intermuscular fat (IMF), subcutaneous fat, total thigh, and thigh compartment (TC) areas and peak exercise oxygen consumption (peak VO₂). There were no significant intergroup differences in total thigh area, TC, subcutaneous fat, or SM. However, in the HFpEF versus HC group, IMF area (35.6 ± 11.5 vs 22.3 ± 7.6 cm², p = 0.01), percent IMF/TC (26 ± 5 vs 20 ± 5%, p = 0.005), and the ratio of IMF/SM (0.38 ± 0.10 vs 0.28 ± 0.09, p = 0.007) were significantly increased, whereas percent SM/TC was significantly reduced (70 ± 5 vs 75 ± 5, p = 0.009). In multivariate analyses, IMF area (partial r = −0.51, p = 0.002) and IMF/SM ratio (partial r = −0.45, p = 0.006) were independent predictors of peak VO₂ whereas SM area was not (partial r = −0.14, p = 0.43). Thus, older patients with HFpEF have greater thigh IMF and IMF/SM ratio compared with HCs, and these are significantly related to their severely reduced peak VO₂. These data suggest that abnormalities in SM composition may contribute to the severely reduced exercise capacity in older patients with HFpEF. This implicates potential targets for novel therapeutic strategies in this common debilitating disorder of older persons.