The objective of this prospective observational study was to assess the growth and body composition of term small-for-gestational-age (SGA) infants from birth to 6 months and evaluate the effect of catch-up growth (CUG) on body composition. Term SGA newborns were recruited at birth. Anthropometry and body composition were evaluated at 3 days, 6, 10 and 14 weeks, and 6 months. Fat and fat-free mass (FM and FFM) were compared between infants with and without CUG (increase in weight Z-score by > 0·67) by air displacement plethysmography. Factors that could affect body composition and CUG, including parents’ BMI and stature, infants’ birth weight, sex and feeding, were evaluated. A total of 143 SGA newborns (sixty-six boys) with birth weight of 2336 (sd 214) g were enrolled; 109 were followed up till 6 months. Median weight Z-score increased from −2·3 at birth to −1·3 at 6 months, with 51·9 % of infants showing CUG. Infants with CUG had higher FM (1796 (sd 491) g v. 1196 (sd 474) g, P < 0·001) but similar FFM (4969 (sd 508) g v. 4870 (sd 622) g, P = 0·380), and consequently higher FM percentage (FM%) (26·5 (sd 5·8) v. 19·7 (sd 6·9), P < 0·001), compared with those without CUG. Lower birth weight, exclusive breast-feeding and higher parental stature were positively associated with CUG. In conclusion, CUG in term SGA infants in the first 6 months of life was almost entirely attributable to greater gain in FM. Follow-up of this cohort will provide insight into the long-term effect of disproportionate gain in FM in early infancy in SGA babies.