Despite the large number of children in India, there is little information on the impact of children's disability on school enrolment, and how this differs by population. We estimated the prevalence of childhood disability in two sites in Tamil Nadu, southern India, and the effect of functional difficulty on school enrolment. We used a parent-reported survey containing the UNICEF-Washington Group questions to identify children aged 5 to 17 years with functional difficulty during a census conducted for an ongoing trial. We estimated pooled- and gender-specific prevalence of functional difficulty among 29,044 children. We fitted regression models to identify subgroups with higher rates of functional difficulty and the effect of functional difficulty on reported school enrolment. We estimated the modification of the effect of functional difficulty by age, gender, socioeconomic status, household education, and sub-site, on additive and multiplicative scales. We found of 29,044 children, 299 (1.0%) had any functional difficulty, equal among boys and girls. Being understood (0.5%) and walking (0.4%) were the most common difficulties. Functional difficulty was strongly associated with non-enrolment in school (Prevalence ratio [PR] 4.59, 95% CI: 3.87, 5.43) after adjusting for age, gender, and site. We show scale-dependent differences between age and socioeconomic groups in the effect of functional difficulty on enrolment. This study shows that at least one in a hundred children in this region have severe functional difficulties and nearly half of these children are not enrolled in school, highlighting the need for further efforts and evidence-based interventions to increase school enrolment among these groups.