Nonalcoholic fatty liver disease (NAFLD) is the most common chronic liver disease in children. In order to advance the field of NAFLD, noninvasive imaging methods for measuring liver fat are needed. Advanced magnetic resonance imaging (MRI) has shown great promise for the quantitative assessment of hepatic steatosis but has not been validated in children. Therefore, this study was designed to evaluate the correlation and diagnostic accuracy of MRI‐estimated liver proton density fat fraction (PDFF), a biomarker for hepatic steatosis, compared to histologic steatosis grade in children. The study included 174 children with a mean age of 14.0 years. Liver PDFF estimated by MRI was significantly (P < 0.01) correlated (0.725) with steatosis grade. The correlation of MRI‐estimated liver PDFF and steatosis grade was influenced by both sex and fibrosis stage. The correlation was significantly (P < 0.01) stronger in girls (0.86) than in boys (0.70). The correlation was significantly (P < 0.01) weaker in children with stage 2‐4 fibrosis (0.61) than children with no fibrosis (0.76) or stage 1 fibrosis (0.78). The diagnostic accuracy of commonly used threshold values to distinguish between no steatosis and mild steatosis ranged from 0.69 to 0.82. The overall accuracy of predicting the histologic steatosis grade from MRI‐estimated liver PDFF was 56%. No single threshold had sufficient sensitivity and specificity to be considered diagnostic for an individual child. Conclusions: Advanced magnitude‐based MRI can be used to estimate liver PDFF in children, and those PDFF values correlate well with steatosis grade by liver histology. Thus, magnitude‐based MRI has the potential for clinical utility in the evaluation of NAFLD, but at this time no single threshold value has sufficient accuracy to be considered diagnostic for an individual child. (Hepatology 2015;61:1887–1895)