Introduction Crohn's disease (CD) is a chronic inflammatory disorder that can involve any part from mouth to anus but predominantly involves the distal small intestine and proximal colon. Sarcopenia is recognized as muscle failure consequent to loss of skeletal muscle strength, function, and mass. Sarcopenia was found to be prevalent in CD patients. Objectives The primary objective of our study was to assess the prevalence of sarcopenia in CD patients, its correlation with disease activity, and the effect of sarcopenia on the prognosis of CD. The secondary objectives were to find out whether there is any correlation of sarcopenia with C-reactive protein (CRP), erythrocyte sedimentation rate (ESR), albumin, and hemoglobin levels. Materials and methods This was a prospective cohort study done on 70 newly diagnosed CD patients in the Department of Gastroenterology, Government Medical College, Kozhikode, Kerala, India. Sarcopenia was assessed with the L3 skeletal muscle index (L3SMI) using a cross-sectional image at the L3 level from a cross-sectional image using Image J software. The cut-off of L3SMI was < 36.5 cm(2)/m(2) and 30.2 cm(2)/m(2) for male patients and female patients, respectively. The prevalence of sarcopenia was assessed. Its effect on clinical and endoscopic disease severity as well as blood parameters was assessed, and the outcome was measured by clinical remission, response to therapy, and number of disease flares. Results The study included 70 newly diagnosed CD patients above 18 years. Out of 70 patients, 26 were female patients and 44 were male patients. The mean age of the study population was 29.86. Mean L3SMI of the population was 37.35 +/- 6.63 cm(2)/m(2). Prevalence of sarcopenia was 38.6% (n=27). The sarcopenia group had a younger age of disease onset (24.52 +/- 8.22). Body mass index (BMI) was lower in the sarcopenia group (15.12 +/- 1.33 kg/m(2)). Patients with sarcopenia had higher clinical disease severity according to the Crohn's disease activity index (CDAI) score and higher endoscopic severity according to the simple endoscopic score (SES-CD score). Hemoglobin and albumin were lower, and CRP and ESR were higher in the sarcopenia group. Remission at six-month follow-up was 48.1% in the sarcopenia group and was lower when compared to the group without sarcopenia. The number of disease flares was higher in the sarcopenia group (1.07 +/- 1.035). Conclusion Sarcopenia is prevalent in CD patients. Patients with sarcopenia had higher clinical and endoscopic disease severity. There is decreased remission and an increased number of flares in patients with sarcopenia. Sarcopenia correlated with hemoglobin, albumin, CRP, and ESR.