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Children who experience difficulties with learning mathematics should be taught by teachers who focus on the child's best way of learning. Analyses of the mathematical difficulties are necessary for fine-tuning mathematics education to the needs of these children. For this reason, an instrument for Observing and Analyzing children's Mathematical Development (OAMD), based on action theory, has been developed. The use of levels of action is a new insight in the diagnostic process. Using the OAMD makes it possible to explore and analyze a child's knowledge, proficiency and possible difficulties on four levels of acting in the domain of Number (counting, addition, subtraction, multiplication and division). The research concerns children from kindergarten up to grade three. In this article, we will discuss the purpose and the construction of the instrument with the focus on the usability of the OAMD. The study examines the quality and the diagnostic value of the instrument by means of the internal consistency, the test-retest reliability and the construct validity. The analyses show positive results. The conclusion of the research is that the OAMD is a suitable instrument for the analysis of numerical development of young children and their possible difficulties in this domain.