Objectives: Peruvians are experiencing rapid dietary and lifestyle changes, resulting in a phenomenon known as the “dual burden of disease.” A common manifestation of the dual burden in individuals is the co-occurrence of overweight and anemia. Despite recent initiatives introduced to address these concerns, rates continue to be public health concerns. This study investigates the relationship between immune activation and lack of response to iron supplementation after 1 month of treatment and explores variation in body fat stores as a potential moderator between immune function and response to treatment. Methods: Data come from children, aged 2–5 years (n = 50) from a peri-urban community in Lima, Peru. Multivariate logistic regression models were used to explore the associations between response to treatment (Hb > =11.0 g/dl) after 1 month of treatment), markers of immune activation (C-reactive protein [CRP] and reported morbidity symptoms), and measures of body fat (waist-to-height ratio, triceps skinfold thickness, and body mass index [BMI]). Results: We found that high CRP is associated with a lack of response to iron supplementation after 1 month of treatment and that BMI z-score may moderate this association. Generally, larger body size is associated with response to iron supplementation whether or not the children in this sample have high immune activation. However, the probability of anemic children responding to iron supplementation treatment differed across adiposity measures. Conclusions: Our finding suggesting that adiposity and CRP influence response to iron supplementation, furthers our understanding of the relationship between inflammation and anemia treatment in children and has both theoretical and public health implications.