Background: Auditory development in children with hearing loss, including the perception of prosody, depends on having adequate input from cochlear implants and/or hearing aids. Lack of adequate auditory stimulation can lead to delayed speech and language development. Nevertheless, prosody perception and production in people with hearing loss have received less attention than other aspects of language. The perception of auditory information conveyed through prosody using variations in the pitch, amplitude, and duration of speech is not usually evaluated clinically. Purpose: This study (1) compared prosody perception and production abilities in children with hearing loss and children with normal hearing; and (2) investigated the effect of age, hearing level, and musicality on prosody perception. Research Design: Participants were 16 children with hearing loss and 16 typically developing controls matched for age and gender. Fifteen of the children with hearing loss were tested while using amplification (n = 9 hearing aids, n = 6 cochlear implants). Six receptive subtests of the Profiling Elements of Prosody in Speech-Communication (PEPS-C), the Child Paralanguage subtest of Diagnostic Analysis of Nonverbal Accuracy 2 (DANVA 2), and Contour and Interval subtests of the Montreal Battery of Evaluation of Amusia (MBEA) were used. Audio recordings of the children's reading samples were rated using a perceptual prosody rating scale by nine experienced listeners who were blinded to the children's hearing status. Study Sample: Thirty two children, 16 with hearing loss (mean age = 8.71 yr) and 16 age- and gender- matched typically developing children with normal hearing (mean age = 8.87 yr). Data Collection and Analysis: Assessments were completed in one session lasting 1-2 hours in a quiet room. Test items were presented using a laptop computer through loudspeaker at a comfortable listening level. For children with hearing loss using hearing instruments, all tests were completed with hearing devices set at their everyday listening setting. Results: All PEPS-C subtests and total scores were significantly lower for children with hearing loss compared to controls (p < 0.05). The hearing loss group performed more poorly than the control group in recognizing happy, sad, and fearful emotions in the DANVA 2 subtest. Musicality (composite MBEA scores and musical experience) was significantly correlated with prosody perception scores, but this link was not evident in the regression analyses. Regression modeling showed that age and hearing level (better ear pure-tone average) accounted for 55.4% and 56.7% of the variance in PEPS-C and DANVA 2 total scores, respectively. There was greater variability for the ratings of pitch, pitch variation, and over-all impression of prosody in the hearing loss group compared to control group. Prosody perception (PEPS-C and DANVA 2 total scores) and ratings of prosody production were not correlated. Conclusions: Children with hearing loss aged 7-12 yr had significant difficulties in understanding different. aspects of prosody and were rated as having more atypical prosody overall than controls. These findings suggest that clinical assessment and speech language therapy services for children with hearing loss should be expanded to target prosodic difficulties. Future studies should investigate whether musical training is beneficial for improving receptive prosody skills.