Auditory spatial processing is an important ability in everyday life and allows the processing of omnidirectional information. In this review, we report and compare data from psychoacoustic and electrophysiological experiments on sound localisation accuracy and auditory spatial discrimination in infants, children, and young and older adults. The ability to process auditory spatial information changes over lifetime: the perception of the acoustic space develops from an initially imprecise representation in infants and young children to a concise representation of spatial positions in young adults and the respective performance declines again in older adults. Localisation accuracy shows a strong deterioration in older adults, presumably due to declined processing of binaural temporal and monaural spectro-temporal cues. When compared to young adults, the thresholds for spatial discrimination were strongly elevated both in young children and older adults. Despite the consistency of the measured values the underlying causes for the impaired performance might be different: (1) the effect is due to reduced cognitive processing ability and is thus task-related; (2) the effect is due to reduced information about the auditory space and caused by declined processing in auditory brain stem circuits; and (3) the auditory space processing regime in young children is still undergoing developmental changes and the interrelation with spatial visual processing is not yet established. In conclusion, we argue that for studying auditory space processing over the life course, it is beneficial to investigate spatial discrimination ability instead of localisation accuracy because it more reliably indicates changes in the processing ability.