Purpose: This study aimed to examine the developmental trajectory of Mandarin tone identification in quiet and two noisy conditions: speech-shaped noise (SSN) and multitalker babble noise. In addition, we evaluated the relationship between tonal identification development and working memory capacity. Method: Ninety-three typically developing children aged 5--8 years and 23 young adults completed categorical identification of two tonal continua (Tone 1--4 and Tone 2--3) in quiet, SSN, and babble noise. Their working memory was additionally measured using auditory digit span tests. Correlation analyses between digit span scores and boundary widths were performed. Results: Six-year-old children have achieved the adultlike ability of categorical identification of Tone 1--4 continuum under both types of noise. Moreover, 6- year-old children could identify Tone 2--3 continuum as well as adults in SSN. Nonetheless, the child participants, even 8-year-olds, performed worse when tokens from Tone 2--3 continuum were masked by babble noise. Greater working memory capacity was associated with better tone identification in noise for preschoolers aged 5--6 years; however, for school-age children aged 7--8 years, such correlation only existed in Tone 2--3 continuum in SSN. Conclusions: Lexical tone perception might take a prolonged time to achieve adultlike competence in babble noise relative to SSN. Moreover, a significant interaction between masking type and stimulus difficulty was found, as indicated by Tone 2--3 being more susceptible to interference from babble noise than Tone 1--4. Furthermore, correlations between working memory capacity and tone perception in noise varied with developmental stage, stimulus difficulty, and masking type.