Magnetoencephalography (MEG) detects the brain's magnetic fields as generated by intra-cellular currents during synchronized neuronal activity. It is noninvasive, has excellent temporal resolution, and it can localize neuronal activity with good precision. For these reasons many scientists interested in the localization of brain functions, such as auditory processing, have turned to MEG. The technique, however, is not without its drawbacks. Those reluctant to employ it cite its time-consuming data analysis as well as its relative awkwardness among pediatric populations owing to the fact that MEG requires subjects to be fairly still during experiments. Due to these methodological challenges, infant MEG studies are not commonly pursued. In our study MEG was employed to study auditory discrimination in infants. We had two goals: first, to determine whether reliable results could be obtained from infants despite their movements; and second, to improve MEG data analysis methods. In order to get more reliable results from infants we employed novel hardware and software solutions to better deal with noise and movement. With these solutions, the location and orientation of the head can be tracked in real time and the external magnetic disturbances can be eliminated, such as that due to heart beat and limb movement. In the present study these new methods were used to study the biomagnetic equivalents of event-related potentials (ERPs) in response to changes in auditory stimuli in healthy, full-term infants. Our findings indicate that with the use of these new analysis routines, MEG will prove to be a very useful and more accessible experimental technique among pediatric populations. Nonetheless, several problems remain. Adult-sized helmets are too large to acquire reliable infant data from both hemispheres at the same time. Although results are much better now that we are able to track head movements real-time, disturbances due to the heart and limbs remain a problem in some infants. Finally, data analysis continues to be time-consuming and requires considerable expertise.