Abstract Background Physical activity is associated with improvement in lung function; however, pollution exposure during physical activity can lead to a transient reduction in lung function. This paradoxical relationship may be linked to altered T regulatory (Treg) cell activity, which increases with exercise and suppresses airway inflammation, but decreases in association with exposure to air pollution. To clarify these relationships, we investigated buccal cell DNA methylation of the forkhead box p3 (FOXP3) gene promoter, a proposed biomarker of Treg activity. We hypothesized that active urban children would have lower FOXP3 promoter methylation, associated with better lung function compared to non-active children. We also hypothesized that this relationship would be attenuated by high exposure to the air pollutant black carbon (BC). Methods We performed a cross-sectional study of 135 children ages 9–14 who live in New York City. Activity was measured across 6 days. BC exposure was assessed by personal monitors worn for two 24-h periods, followed by lung function assessment. Buccal swabs were collected for DNA methylation analysis of three regions (six CpG sites) in the FOXP3 promoter. Results In multivariable regression models, overall, there was no significant relationship between physical activity and FOXP3 promoter methylation (p > 0.05). However, in stratified analyses, among children with higher BC exposure (≥1200 ng/m3), physical activity was associated with 2.37% lower methylation in promoter 2 (CpGs −77, −65, and −58) (β estimate = −2.37%, p  0.05). Differences across strata were statistically significant (p interaction = 0.04). Among all children, after controlling for BC concentration, promoter 2 methylation was associated with reduced FEV1/FVC (β estimate = −0.40%, p