The acquisition of the function of case-marking is a key step in the development of sentence processing for German-speaking children since case-marking reveals the relations between sentential arguments. In this study, we investigated the development of the processing of case-marking and argument structures in children at 3, 4;6 and 6 years of age, as well as its processing in adults. Using EEG, we measured event-related potentials (ERPs) in response to object-initial compared to subject-initial German sentences including transitive verbs and case-marked noun phrases referring to animate arguments. We also tested children’s behavioral competence in a sentence-picture matching task. Word order and case-marking were manipulated in German main clauses. Adults’ behavioral performance was close to perfect and their ERPs revealed a negativity for the processing of the topicalized accusative marked noun phrase (NP1) and no effect for the second NP (NP2) in the object-initial structure. Children’s behavioral data showed a significant above-chance outcome in the subject-initial condition for all age groups, but not for the object-initial condition. In contrast to adults, the ERPs of 3-year-olds showed a positivity at NP1, indicating difficulties in processing the non-canonical object-initial structures. Children at the age of 4;6 did not differ in the processing patterns of object-initial vs. subject-initial sentences at NP1 but showed a slight positivity at NP2. This positivity at NP2, which implies syntactic integration difficulties, is more pronounced in 6-year-olds but is absent in adults. At NP1, however, 6-year-olds show the same negativity as adults. In sum, the behavioral and electrophysiological findings demonstrate that children in each age group use different strategies, which are indicative of their developmental stage. While 3-year-olds merely detect differences in the two sentence structures without being able to use this information for sentence comprehension, 4;6-year-olds proceed to use mainly a word-order strategy, processing NP1 in both conditions in the same manner, which leads to processing difficulties upon detecting case-marking cues at NP2. At the age of 6, children are able to use case-marking cues for comprehension but still show enhanced effort for correct thematic-role assignment.