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Abstract Background Individuals with Autism Spectrum Disorders (ASD) typically show impaired eye contact during social interactions. From a young age, they look less at faces than typically developing (TD) children and tend to avoid direct gaze. However, the reason for this behavior remains controversial; ASD children might avoid eye contact because they perceive the eyes as aversive or because they do not find social engagement through mutual gaze rewarding. Methods We monitored pupillary diameter as a measure of autonomic response in children with ASD (n = 20, mean age = 12.4) and TD controls (n = 18, mean age = 13.7) while they looked at faces displaying different emotions. Each face displayed happy, fearful, angry or neutral emotions with the gaze either directed to or averted from the subjects. Results Overall, children with ASD and TD controls showed similar pupillary responses; however, they differed significantly in their sensitivity to gaze direction for happy faces. Specifically, pupillary diameter increased among TD children when viewing happy faces with direct gaze as compared to those with averted gaze, whereas children with ASD did not show such sensitivity to gaze direction. We found no group differences in fixation that could explain the differential pupillary responses. There was no effect of gaze direction on pupil diameter for negative affect or neutral faces among either the TD or ASD group. Conclusions We interpret the increased pupillary diameter to happy faces with direct gaze in TD children to reflect the intrinsic reward value of a smiling face looking directly at an individual. The lack of this effect in children with ASD is consistent with the hypothesis that individuals with ASD may have reduced sensitivity to the reward value of social stimuli.