The purpose of the study was to investigate bone mineral density (BMD) in children with type 1 diabetes (DM1) and to establish the relationships between BMD, physical activity, glycemic control, and markers of systemic oxidative stress and inflammation. We studied 30 children with DM1, aged 4.7–18.6 years, and 30 healthy subjects, matched by sex, age, and body mass index (BMI). Mean duration of DM1 was 5.4 ± 3.4 years and mean glycosylated hemoglobin (HbA_1c) level over 12 months was 9.8 ± 1.5%. Lumbar and total bone mineral density (BMD, g/cm²) were measured by dual-energy X-ray absorptiometry (DXA). We calculated the apparent volumetric lumbar BMD (BMDvol, g/cm³) and total mineral content adjusted for age and height (BMCadj), and measured plasma intercellular adhesion molecule-1 (ICAM-1), high sensitivity C-reactive protein (hs-CRP), and urinary 8-iso-prostaglandin F_2a (F₂-IsoPs). Calcium (Ca) intake was assessed by questionnaire and physical activity by questionnaire and accelerometer (ActiGraph, count/h). Total BMCadj and lumbar BMDvol were significantly lower in children with DM1 than in controls (101.8 ± 7.7 vs. 107 ± 5.7%, P = 0.005; 0.32 ± 0.08 vs. 0.36 ± 0.09 g/cm³, P = 0.05, respectively). These differences were mostly caused by the differences in boys. Plasma ICAM-1 and hs-CRP levels were significantly higher in the DM1 group compared to the controls. Ca intake and urine F₂-IsoPs levels were similar between the groups. Diabetic boys were less active than controls (18231 ± 6613 vs. 24145 ± 7449 count/h, P = 0.04). In the DM1 group, lumbar BMDvol correlated inversely with urinary F₂-IsoPs (r = −0.5; P = 0.005) and plasma ICAM-1 levels (r = −0.4; P = 0.02), and also with HbA_1c levels after adjustment for age (r = −0.45; P < 0.05). Total BMCadj correlated inversely with HbA_1c levels (r = −0.4; P = 0.02). We conclude that children with DM1, particularly boys, have lower BMD. Poor glycemic control, elevated markers of oxidative stress, and inflammation are associated with lower BMD.