Using data from five waves of the Vietnam Household Living Standard Survey, we findevidence of urban-rural expenditure inequality. This represents the most important single factor explaining national inequality in Vietnam over the period 1993 and 2006. Urban-rural inequality increased remarkably from 1993 to 1998, and peaked in 2002 before reducing slightly in 2004,and significantly in 2006. The urban-rural gap also monotonically increases from the poorer to the richer groups of the expenditure distribution. We use a variant of the Oaxaca-Blinderdecomposition method, applied to the unconditional quantile regression method of Firpo, Fortinand Lemieux (2009), to explain the components of the real per capita household expendituredifferentials between urban and rural households at selected quantiles of the distribution. We also compare these estimates with those at mean obtained by OLS. Our results show a number offactors contributing significantly to the high urban-rural gap. These include inter-groups differences in education, household demographic structure and industrial structure, and theirrelated returns. Adjusting the average characteristics of rural households to those of urban households will reduce about a half of the overall urban-rural expenditure gap. A significant part of the remaining unexplained component lies in the intercept differences; that is, the inter-group differences in other factors not captured in the model that favor urban households.