Objective Childhood obesity may be related to school environment, but previous studies often focused on food environment only. This study aimed to examine the relationship between school physical activity environment and childhood obesity. Study design This is a cross-sectional study with multilevel data collected on school physical activity environment using teacher questionnaires, students' growth, and obesity status from electronic health records, and neighborhood socioeconomic status from census data. Results This study included 208 280 students (6-18 years of age) from 438 schools (45% of Hong Kong). Prevalence of obesity was 5.0%. After controlling for socioeconomic status and intraschool correlation, robust Poisson regression revealed a reduced obesity risk associated with higher teachers' perceived physical activity benefits (risk ratio 0.96, 95% CI 0.94-0.99, P =.02), physical activity teaching experience (0.93, 0.91-0.96, P <.001), school campus size (0.93, 0.87-0.99, P =.02), physical activity ethos (0.91, 0.88-0.94, P <.001), number of physical activity programs (0.93, 0.90-0.96, P <.001), and physical activity facilities (0.87, 0.84-0.90, P <.001). Students in schools with at least 3 physical activity-friendly environmental factors (11.7%) had a much lower risk of obesity (0.68, 0.62-0.75, P <.001) than those without (23.7%). Conclusions A physical activity-friendly school environment is associated with lower risk of obesity. School physical activity environment should be considered in future epidemiologic and intervention studies.