This cross-sectional study aimed to determine ethnic and environmental influences on the relationship between BMI and percentage body fat, using a sample of 144 Japanese and 140 Australian-Caucasian men living in Australia, and eighty-eight Japanese men living in Japan. Body composition was assessed by anthropometry using standard international methods (International Society for the Advancement of Kinanthropometry protocol). Body density was predicted using Durnin and Womersley's (1974) equation, and percentage body fat was calculated from Siri's (1961) equation. Significant (P<0·05) ethnic differences in stature, body mass and BMI were observed between Japanese and Australian men, but no ethnic differences were observed in their percentage body fat and height-corrected sum of skinfold thicknesses. No differences were found in the BMI–percentage body fat relationship between the Japanese subjects living in Australia and in Japan. Significant (P<0·05) ethnic differences in the BMI–percentage body fat relationship observed from a comparison between pooled Japanese men (aged 18–40 years, BMI range 16·6–32·8 kg/m2) and Australians (aged 18–39 years, BMI range 16·1–31·4 kg/m2) suggest that Japanese men are likely to have a greater percentage body fat than Australian men at any given BMI value. From the analyses, the Japanese men were estimated to have an equivalent amount of body fat to the Australian men at BMI values that were about 1·5 units lower than those of the Australians (23·5 kg/m2 and 28·2 kg/m2, respectively). It was concluded that Japanese men have greater body fat deposition than Australian-Caucasians at the same BMI value. Japanese men may therefore require lower BMI cut-off points to identify obese individuals compared with Australian-Caucasian men.