Autism is associated with challenges in emotion recognition. Yet, little is known about how emotion recognition develops over time in autistic children. This four-wave longitudinal study followed the development of three emotion-recognition abilities regarding four basic emotions in children with and without autism aged 2.5 to 6 years over three years. Behavioral tasks were used to examine whether children could differentiate facial expressions (emotion differentiation), identify facial expressions with verbal labels (emotion identification), and attribute emotions to emotion-provoking situations (emotion attribution). We confirmed previous findings that autistic children experienced more difficulties in emotion recognition than non-autistic children and the group differences were present already from the preschool age. However, the group differences were observed only when children processed emotional information from facial expressions. When emotional information could be deduced from situational cues, most group differences disappeared. Furthermore, this study provided novel longitudinal evidence that emotion recognition improved with age in autistic children: compared to non-autistic children, autistic children showed similar learning curves in emotion discrimination and emotion attribution, and they showed greater improvements in emotion identification. We suggest that inclusion and respect in an environment free of stereotyping are likely to foster the development of emotion recognition among autistic children.