Humans often judge others egocentrically, assuming that they feel or think similarly to themselves. Emotional egocentricity bias (EEB) occurs in situations when others feel differently to oneself. Using a novel paradigm, we investigated the neurocognitive mechanisms underlying the developmental capacity to overcome such EEB in children compared with adults. We showed that children display a stronger EEB than adults and that this correlates with reduced activation in right supramarginal gyrus (rSMG) as well as reduced coupling between rSMG and left dorsolateral prefrontal cortex (lDLPFC) in children compared with adults. Crucially, functional recruitment of rSMG was associated with age-related differences in cortical thickness of this region. Although in adults the mere presence of emotional conflict occurs between self and other recruited rSMG, rSMG-lDLPFC coupling was only observed when implementing empathic judgements. Finally, resting state analyses comparing connectivity patterns of rSMG with that of right temporoparietal junction suggested a unique role of rSMG for self-other distinction in the emotional domain for adults as well as for children. Thus, children's difficulties in overcoming EEB may be due to late maturation of regions distinguishing between conflicting socio-affective information and relaying this information to regions necessary for implementing accurate judgments.