Within the frameworks of shared decision-making and participation in healthcare, children’s ability to understand and appreciate information pertaining to illness and treatment is important. Physicians are mainly responsible for assessing decision-making capacity (DMC) but may encounter difficulties arising from the limited basis of evidence with regard to this concept in pediatrics. Three issues contributing to this paucity of knowledge on DMC of children can be identified: (1) conceptual blurriness and absence of clear terminology, (2) lack of validated tools to reliably assess DMC in the pediatric population, and (3) a need to include a developmental framework to understand DMC in children and adolescents. The aim of this paper is to examine these three issues and provide practical recommendations to advance the concept and its assessment in pediatrics as a step to ensuring children’s developmentally appropriate participation in healthcare. Finally, the paper highlights the ethical dimension of assessing DMC emphasizing the importance of physicians’ attitudes for the assessment process. Conclusion: A detailed understanding of DMC is necessary to inform developmentally appropriate participation. In order to achieve this, pediatric practice needs to address challenges that are specific to providing healthcare for children, including conceptual issues, assessment, and aspects of child development.