Background: Studies have demonstrated both positive and negative effects of obesity on clinical outcomes in chronic obstructive pulmonary disease (COPD). In other chronic diseases, fat location is differentially associated with disease outcomes; however, this relationship has not been well studied in COPD. Objective: To determine if fat location explains the differential association of body mass index (BMI) with clinical outcome measures in smokers. Methods: Baseline and 6-year chest computed tomography scans from 68 current and former smokers were used to quantify mediastinal and subcutaneous fat. The relationships of BMI, mediastinal fat, and subcutaneous fat with cross-sectional and 6-year changes in pulmonary function, incremental shuttle walk distance (ISWD), quantitative emphysema, and circulating interleukin-6 (IL-6) and C-reactive protein (CRP) levels were assessed using generalized linear models adjusted for clinically relevant covariates. Results: Baseline subcutaneous fat was negatively associated with emphysema progression over 6 years (p < 0.01). BMI and mediastinal fat volume were inversely associated with baseline ISWD (p < 0.01 and p = 0.043, respectively) as well as 6-year change in ISWD (p = 0.020 and p = 0.028, respectively). IL-6 was directly associated with BMI and mediastinal fat (p < 0.01) and CRP was directly associated with BMI only (p = 0.033). Conclusions: Increased subcutaneous chest fat is associated with less emphysema progression over time in smokers, while increased mediastinal fat volume is associated with decreased walk distance and increased IL-6 levels. These findings suggest a complex interaction between fat, inflammation, and emphysema that should be considered when phenotyping patients with COPD and provide new evidence of an inverse association between emphysema progression and chest subcutaneous fat.