Abstract Algebra is one of the topics in mathematics found to be difficult due to its foundation. Hence, most of researches are being done on how to develop algebraic thinking in lower primary to ease understanding.It is known that algebraic thinking is arranged into two main components, the development of tools to think mathematically and study of the basic ideas of algebraic thinking. The purpose of this study is aiming at investigating pupils’ development of algebraic thinking on addition and subtraction using compensation in grade three (3). The target population and the sample for the study was grades three (3) in St. Peter’s nursery and primary schools at Rejaf County in juba city south Sudan where fifty pupils were selected and amongst fifty, five pupils were selected randomly for interviewed.Qualitative approach was employed for the study. The research instruments were test, interview, and observation. Researcher used description for data analysis.The findings for this study were as follow; it is found that pupils easily develop their algebraic thinking on addition using compensation. Also, it is found that pupils could easily develop their algebraic thinking on subtraction but they mixed up compensation principles. Though it is hard on subtraction, compensation is the foundation for algebraic thinking to be developed in lower grades. Researcher is urging curriculum developers to include compensation strategy in mathematics teacher’s guide and pupil’s textbook to ease the understanding of algebra. Further study is on pupil’s algebraic thinking development on multiplication and division using compensation strategy. Key words; algebraic thinking, SOLO model, development of algebraic thinking in early grade, socio-cultural theory, and cognitive development, compensation, addition, subtraction.