Schools are integral settings in which children can participate in moderate and vigorous physical activity. This study reports on the relationship between playground characteristics and child activity levels using a combination of quantitative and qualitative methods. The aim of the study is to increase understanding of how children respond to their school playground environments. Twenty-three primary schools located in a predominantly low socio-economic area of Melbourne, Australia were involved. SOPLAY (System for Observing Play and Leisure Activity in Youth) was administered in all 23 schools to measure the levels of student physical activity and playground environmental factors such as equipment provision. In 12 of the 23 schools, a sample of 9-11-year-old students participated in focus group discussions exploring perceptions of their school playgrounds using a photo ordering technique. A larger proportion of students participated in VPA when loose equipment (60% vs. 52%; p < 0.001) and teacher supervision (62% vs. 52%; p < 0.001) were present in activity settings, compared to when they were unavailable. Fixed play equipment and bitumen with court/play-line markings were seen by children as settings inviting active play but only had the greatest impact on moderate activity (fixed play equipment: 35% vs. 20%, p < 0.001; court markings/goals: 62% vs. 52%, p < 0.001; play-line markings: 25% vs. 20%, p = 0.04). The mixed method design provided a greater understanding of the potential influence of environmental characteristics on children's lunch time activity levels and their perceptions of play areas. The findings indicate that relatively simple changes such as the provision of loose equipment, painting of court and play-line markings, and increased teacher presence on the playground, are likely to provide opportunities for increased physical activity.