Face and gaze processing were studied using magnetoencephalography in 10 children with autism and 10 normally developing children, aged between 7 and 12 years. The children performed two tasks in which they had to discriminate whether images of faces presented sequentially in pairs were identical. The images showed four different categories of gaze: direct gaze, eyes averted (left or right) and closed eyes but there was no instruction to focus on the direction of gaze. Images of motorbikes were used as control stimuli. Faces evoked strong activity over posterior brain regions at about 100 ms in both groups of children. A response at 140 ms to faces observed over extrastriate cortices, thought to be homologous to the N170 in adults, was weak and bilateral in both groups and somewhat weaker (approaching significance) in the children with autism than in the control children. The response to motorbikes differed between the groups at 100 and 140 ms. Averted eyes evoked a strong right lateralized component at 240 ms in the normally developing children that was weak in the clinical group. By contrast, direct gaze evoked a left lateralized component at 240 ms only in children with autism. The findings suggest that face and gaze processing in children with autism follows a trajectory somewhat similar to that seen in normal development but with subtle differences. There is also a possibility that other categories of object may be processed in an unusual way. The inter-relationships between these findings remain to be elucidated.