Although children’s social development is embedded in social interaction, most developmental neuroscience studies have examined responses to non-interactive social stimuli (e.g. photographs of faces). The neural mechanisms of real-world social behavior are of special interest during middle childhood (roughly ages 7–13), a time of increased social complexity and competence coinciding with structural and functional social brain development. Evidence from adult neuroscience studies suggests that social interaction may alter neural processing, but no neuroimaging studies in children have directly examined the effects of live social-interactive context on social cognition. In the current study of middle childhood, we compare the processing of two types of speech: speech that children believed was presented over a real-time audio-feed by a social partner and speech that they believed was recorded. Although in reality all speech was prerecorded, perceived live speech resulted in significantly greater neural activation in regions associated with social cognitive processing. These findings underscore the importance of using ecologically-valid and interactive methods to understand the developing social brain.