While motivation for physical activity (PA) and PA participation have been linked, research on the relationship between motivation for PA and mental health outcomes is scant, with studies involving children largely underrepresented. Grounded in self-determination theory, this cross-sectional study aimed to determine whether autonomous motivation versus external motivation (a form of controlled motivation) for PA is associated with fewer emotional and behavioural difficulties and higher levels of PA in children. A sample of 87 children (aged 8–12 years) were recruited from five primary schools in Victoria, Australia. An adapted version of the Behavioural Regulation in Exercise Questionnaire (BREQ) was used to measure motivation for PA and structured parent-report questions were used to assess moderate-to-vigorous PA (MVPA) levels. Parents also completed the Strengths and Difficulties Questionnaire (SDQ) to measure children’s emotional and behavioural difficulties. Children’s autonomous motivation was associated with fewer emotional and behavioural difficulties (β = −0.25, p = 0.038) and higher levels of MVPA (β = 0.24, p = 0.014). These results indicate autonomous motivation is associated with improved mental health outcomes and higher levels of PA in children. Thus, PA interventions that promote autonomous motivation may enhance children’s mental health compared to interventions that promote mainly controlled forms of motivation.