Children with autism spectrum disorder (ASD) have difficulties with tool use and pantomime actions. The current study utilized functional near-infrared spectroscopy (fNIRS) to examine the neural mechanisms underlying these gestural difficulties. Thirty-one children with and without ASD (age (mean ± SE) = 11.0 ± 0.6) completed a naturalistic peg-hammering task using an actual hammer (hammer condition), pantomiming hammering actions (pantomime condition), and performing meaningless actions with similar joint motions (meaningless condition). Children with ASD exhibited poor praxis performance (praxis error: TD = 17.9 ± 1.7; ASD = 27.0 ± 2.6,p< 0.01), which was significantly correlated with their cortical activation (R = 0.257 to 0.543). Both groups showed left-lateralized activation, but children with ASD demonstrated more bilateral activation during all gestural conditions. Compared to typically developing children, children with ASD showed hyperactivation of the inferior parietal lobe and hypoactivation of the middle/inferior frontal and middle/superior temporal regions. Our findings indicate intact technical reasoning (typical left-IPL activation) but atypical visuospatial and proprioceptive processing (hyperactivation of the right IPL) during tool use in children with ASD. These results have important implications for clinicians and researchers, who should focus on facilitating/reducing the burden of visuospatial and proprioceptive processing in children with ASD. Additionally, fNIRS-related biomarkers could be used for early identification through early object play/tool use and to examine neural effects following gesture-based interventions.