Face perception is considered a remarkable visual ability in humans that is subject to a prolonged developmental trajectory. In response to the COVID-19 pandemic, mask-wearing has become mandatory for adults and children alike. Recent research shows that mask-wearing hinders face recognition abilities in adults, but it is unknown if the same holds true in school-age children in whom face perception is not fully developed. Here we tested children (n = 72, ages 6–14 years old) on the Cambridge Face Memory Test – Kids (CFMT-K), a validated measure of face perception performance. Faces were presented with or without masks and across two orientations (upright/inverted). The inclusion of face masks led to a profound deficit in face perception abilities. This decrement was more pronounced in children compared to adults, but only when task difficulty was adjusted across the two age groups. Additionally, children exhibited reliable correlations between age and the CFMT-K score for upright faces for both the mask and no-mask conditions. Finally, as previously observed in adults, children also showed qualitative differences in the processing of masked versus non-masked faces. Specifically, holistic processing, a hallmark of face perception, was disrupted for masked faces as suggested by a reduced face-inversion effect. Together, these findings provide evidence for substantial quantitative and qualitative alterations in the processing of masked faces in school-age children.