Background: This study presents two experiments that investigated whether children with autism were susceptible to the Thatcher illusion. Perception of the Thatcher illusion requires being able to compute second-order configural relations for facial stimuli. Method: In both experiments children with autism were matched for non-verbal and verbal ability with a group of children with moderate (non-specific) mental retardation (MLD) and a group of typically developing children respectively. Participants were asked to detect the "unusual" face in a two-alternative-forced-choice version of the Margaret Thatcher illusion with grey-scale (Experiment 1) and monochrome "Mooney" face images (Experiment 2). In Experiment 1 participants also performed a control task where buildings had been doctored in the same way as the facial stimuli. Results: Children with autism were as susceptible to the Thatcher illusion as both control groups, in terms of accuracy and reaction time to make decisions about which face was unusual. Children with autism performed more accurately than children with MLD in the buildings task. Conclusion: Children with autism are able to compute second-order configural features in faces and exhibit no difference in face processing, relative to appropriate control groups.