While magnetoencephalography (MEG) is of increasing utility in the assessment of pediatric patients with seizure disorders, this reflects only a part of the clinical potential of the technology. Beyond epilepsy, a broad range of developmental psychiatric disorders require the spatial and temporal resolution of brain activity offered by MEG. This article reviews the application of MEG in the study of auditory processing as an aspect of language impairment in children. Specifically, the potential application of MEG is elaborated in autism spectrum disorders (ASD), a devastating disorder with prevalence of 1 in 150. Results demonstrate the sensitivity of MEG for detection of abnormalities of auditory processing in ASD ('electrophysiological signatures') and their clinical correlates. These findings offer promise for the comprehensive assessment of developmental neuropsychiatric disorders.