Background: Students' prior knowledge plays an important role in learning new knowledge. In physical education (PE) and physical activity settings, studies have confirmed the role of students' prior knowledge. According to Placek and Griffin, these studies demonstrate that: "our students are not empty balls waiting to be filled with knowledge and skill (air) when they arrive at our gymnasium doors. Instead they come ready for action, each with her or his own conceptions (mental models) of activity in general and, more specifically, the focus of that particular unit, lesson, or skill." Currently, however, we have little understanding of how mental models are generated in PE and guide students' understandings and activity choices. Purpose: The goal of this study was to examine third-grade students' mental models of energy expenditure during exercise and identify the underlying conceptual structures from which they were generated. Method: Forty-five third-grade students were interviewed during their regular PE class on their understanding of energy expenditure during exercise. Interviews were analysed using descriptive and axial coding to examine emerging categories and themes. Trustworthiness of data was established through the use of five strategies: (a) the adoption of research methods well established, (b) random sampling, (c) background, qualifications and experience of interviewers, (d) negative case analysis and (e) peer review. Results: Data revealed two mental models of energy expenditure during exercise. In the first mental model, students believe that "When you exercise, you lose your energy and when you are out of energy, you have to stop and rest to get your energy back." Energy expenditure during exercise is understood as an on/off process. Contrary, students in the second mental model believe that "When you exercise, you lose your energy but you can manage your energy expenditure depending on your pace (concept of intensity)." Energy expenditure is understood as a dimmer switch process. These mental models are generated by underlying conceptual structures. Conclusion: Results are discussed related to (a) previous studies on students' mental models and (b) the role of students' prior knowledge in PE and physical activity settings.