The objective of this study is to assess relationship of systemic lupus erythematosus (SLE) activity with quality of life (QOL) and physical function and determine which is more closely correlated with SLE activity in children; and identify factors critical to children's QOL. In this cross-sectional study, children with SLE and parents completed corresponding versions of physical function (Childhood Health Assessment Questionnaire CHAQ), and QOL (Pediatric Quality of Life Inventory-PedsQL Generic/Rheumatology modules) questionnaires. SLE Disease Activity Index (SLEDAI), Systemic Lupus International Collaborating Clinics/ACR Damage Index (SDI), severity, self-concept and socioeconomic status (SES) were measured. For 24 children, CHAQ scores significantly correlated with SLEDAI (rho = 0.4, p = 0.04), SDI (rho = 0.6, p = 0.004), and associated with severity (p = 0.03). PedsQL scores did not significantly correlate with above parameters. Higher self-concept/SES correlated (p < 0.05) with better physical function and QOL. For 19 parents, the only significant correlation was between SLEDAI and Worry domain-Rheumatology module (rho = 0.5, p = 0.01). Lack of strong correlation of disease activity with QOL and physical function suggests that they are different constructs with partial overlap, and should be considered collectively while evaluating the impact of SLE on children/families. Self-concept and SES should be assessed while measuring QOL in children. Larger sample is required to confirm results.