Orbitofrontal reality filtering denotes a memory control mechanism necessary to keep thought and behavior in phase with reality. In adults, it is mediated by the orbitofrontal cortex and subcortical connections and its failure induces reality confusion, confabulations, and disorientation. Here we investigated for the first time the development of this mechanism in 83 children from ages 7 to 11 years and 20 adults. We used an adapted version of a continuous recognition task composed of two runs with the same picture set but arranged in different order. The first run measures storage and recognition capacity (item memory), the second run measures reality filtering. We found that accuracy and reaction times in response to all stimulus types of the task improved in parallel across ages. Importantly, at no age was there a notable performance drop in the second run. This means that reality filtering was already efficacious at age 7 and then steadily improved as item memory became stronger. At the age of 11 years, reality filtering dissociated from item memory, similar to the pattern observed in adults. However, performance in 11-year-olds was still inferior as compared to adults. The study shows that reality filtering develops early in childhood and becomes more efficacious as memory capacity increases. For the time being, it remains unresolved, however, whether this function already depends on the orbitofrontal cortex, as it does in adults, or on different brain structures in the developing brains of children.