Purpose As in other neuromuscular disorders, both denervation and muscle paresis/imbalance are implicated as aetiological factors for contractures in children with a Brachial Plexus Birth Injury (BPBI). Although both factors are related, it is unclear which factor is dominant. The aim of this study is to assess whether contracture formation in children is predominantly related to denervation or to residual muscle function/ imbalance. This might be relevant for understanding contracture formation in other neuromuscular disorders. Methods A total of 100 children (61 boys; mean age 10.4 years, 4 to 18) with unilateral BPBI were included in this cross-sectional study. Severity of the denervation was classified according to Narakas. Muscle function of flexors and extensors of both elbows was measured (in Newtons) using a hand-held dynamometer and flexion contractures were measured with a goniometer. The relation between denervation, muscle function/muscle balance and flexion contracture was assessed using univariate and multivariate analysis. Results Of the children, 57 were Narakas class I, 13 class II and 30 class III. Mean flexion contracture was 25° (90° to -5°). At the affected side the forearm flexion force was 47% and extension force was 67% of the force of the unaffected side. Contractures were more severe in children with higher Narakas classifications (p = 0.001), after neurosurgery (Mann-Whitney U test, p = 0.009) and were related to age (Spearman’s Rho = -0.3, p = 0.008) and to paresis of the extensors (Rho = 0.4, p = 0.000). Flexor paresis as a percentage of unaffected side (Rho = 0.06, p = 0.6) and muscle balance had no influence. Conclusion In BPBI, elbow contractures are related to the severity of the neurological lesion, not to residual muscle function.