Abnormal or borderline electroencephalograms are commonly observed in cases of gross mental retardation. However, fewer studies have focused on the use of event-related responses to aid in the differential diagnosis of developmental cognitive disorders. Fetal alcohol syndrome (FAS) and Down syndrome represent the most common known causes of mental retardation in the Western world. Although Down syndrome is easily diagnosed with a chromosome assay, FAS can be more difficult to diagnose since the diagnostic features are more subjectively based. The present study is the first to characterize auditory event-related potentials (ERPs) in children with FAS and contrast them to subjects with Down syndrome and controls. A passive auditory “oddball-plus-noise” paradigm was utilized to elicit ERPs. Parietal P300 latencies in response to the noise-burst stimuli for the FAS children were significantly longer, as were the P300s from all cortical sites in Down syndrome subjects in response to the both the infrequent tone and noise-burst stimuli when compared with the controls. Frontal P300s in Down syndrome children were significantly larger in amplitude compared to the controls and FAS children in response to the infrequent tone. A discriminant function analysis also revealed that these children could be correctly classified as being either Down syndrome, FAS, or normal controls using measures of latency and amplitude of the P300. These data suggest that an evaluation of ERP characteristics may provide a better understanding of the differences between FAS and Down syndrome children, and prove to be an aid in the early identification of children with FAS. These results demonstrate neurophysiological differences between FAS and Down syndrome, and suggest that P300 amplitude and latency data collected from a passive ERP task may be helpful in the discrimination of developmental cognitive disorders.