Systemic inflammation is believed to contribute to declining muscle health during aging. The present study aims to examine associations between indicators of muscle health and pro- and anti-inflammatory biomarkers in older men and women, while also considering the impacts of physical activity and protein intake. An assessment of skeletal muscle index (SMI) by bioelectrical impedance analysis, handgrip strength, and 5-sit-to-stand time, using standardized procedures, was conducted in a population of older men (n = 90) and women (n = 148) aged 65–70 years. The inflammatory biomarkers C-reactive protein (CRP), fibrinogen, interleukin (IL)-6, IL-10, IL-18, tumor necrosis factor (TNF)-α, monocyte chemoattractant protein-1, and macrophage inflammatory protein-1α were assessed in blood samples. Data were analyzed and stratified according to biological sex using multiple linear regression models. In older women, SMI was inversely associated with the pro-inflammatory markers CRP (β = −0.372; p < 0.05), fibrinogen (β = −0.376; p < 0.05), and IL-6 (β = −0.369; p < 0.05). Importantly, these associations were independent of abdominal adiposity (waist circumference), protein intake, physical activity level, as well as any adherence to muscle strengthening guidelines (≥2 sessions/week). In contrast, no corresponding associations were observed in men. In conclusion, our findings indicate the detrimental influence of a pro-inflammatory environment on muscle health regardless of important lifestyle-related factors in older women. However, the lack of such associations in older men highlights the importance of considering biological sex when examining the complex interaction between the systemic inflammatory environment and muscle health.