This study explores the effects of Vietnam’s transition on the welfare of the ethnic majorities (Kinh and Chinese) and minority groups in rural Vietnam. It draws on five rounds of household surveys. It is first observed that the pace of poverty reduction for minorities has surpassed the former over the period 2002 to 2006, although national poverty is still concentrated in the minority group. Secondly, the disparity in living standards has been widening. In particular, the contribution of inequality between the majority and minority tototal inequality has doubled over these periods. Thirdly, the study shows that the pure effectof economic growth on poverty is estimated to have been greater if inequality remainedconstant. It is noted that economic growth between 1993 and 2006 was relatively “pro-poor”for the Khmer, and Central Highland minorities while it was “non pro-poor” for the majority,Northern Upland and other minorities. Finally, decomposition analysis also confirms that theethnic minority are poorer not necessarily because they hold lower endowments than themajority, but because they have lower returns to their endowments even if they have the samelevel of characteristics as the majority. This suggests that the programmes of the government and the development agencies that aim to enhance the endowment of the minority may be less effective than other approaches. For example, an anti-poverty programme to address theexisting structural differences such as improving the quality of their endowments is vital for further poverty reduction and this requires precise investigation of the different socio-economic circumstances affecting the minority groups