Recent developments within the discussion on children’s rights and in the new sociology of childhood come with a strong focus on children’s agency. They stress their status as a social and political actor, emphasise the need to view children as “beings” rather than “becomings” and highlight children’s autonomy and individuality. This chapter argues that the recent “theoretical orthodoxy” of children’s autonomy may purport an overly optimistic view on children’s agency and neglects inequalities within the space of childhood and youth. It describes the capability approach as a more appropriate approach for analysing inequalities within the space of youth and childhood. It overcomes some of the blind spots described. Particularly, it suggests that the capability approach provides an adequate link between prescriptive treaties (like the UNCRC) and descriptive-analytic approaches (like the sociology of childhood and youth). Based on a research project on transitions from school to work, the article reviews the role of welfare State institutions for the construction of children as social policy objects and for their access to citizenship rights, and analyses differences within the experience of youth that can easily be overlooked by a strong focus on children’s agency. The capability approach is used to develop a tentative framework for a situated assessment of children’s and youth lives. The chapter shortly reviews possible venues of childhood and youth research inspired by the capability approach.