The current study examines the processing of upright and inverted faces in 3-year-old children (n = 35). Event-related potentials (ERPs) were recorded during a passive looking paradigm including adult and newborn face stimuli. We observed three face-sensitive components, the P1, the N170 and the P400. Inverted faces elicited shorter P1 latency and larger P400 amplitude. P1 and N170 amplitudes were larger for adult faces. To examine the role of experience in the development of face processing, the processing of adult and newborn faces was compared for children with a younger sibling (n = 23) and children without a younger sibling (n = 12). Age of sibling at test correlated negatively with P1 amplitude for adult and newborn faces. This may indicate more efficient processing of different face ages in children with a younger sibling and potentially reflects a more flexible face representation.