Inequality in health and health care remains a rather challenging issue in China, existing both in rural and urban area, and between rural and urban. This study used nationally representative data to assess inequality in both rural and urban China separately and to identify socioeconomic factors that may contribute to this inequality.This study used 2008 National Health Services Survey data. Demographic characteristics, income, health status, medical service utilization, and medical expenses were collected. Horizontal inequality analysis was performed using nonlinear regression method.Positive inequity in outpatient services and inpatient service was evident in both rural and urban area of China. Greater inequity of outpatient service use in urban than that in rural areas was evident (horizontal inequity index [HI] = 0.085 vs 0.029). In contrast, rural areas had greater inequity of inpatient service use compared to urban areas (HI = 0.21 vs 0.16). The decomposition analysis found that the household income made the greatest pro-rich contribution in both rural and urban China. However, chronic diseases and aging were also important contributors to the inequality in rural area.The inequality in health service in both rural and urban China was mainly attributed to the household income. In addition, chronic disease and aging were associated with inequality in rural population. Those findings provide evidences for policymaker to develop a sustainable social welfare system in China.