Existing research shows an inverse relationship between urban density and the degree of income inequality within metropolitan areas; this information suggests that as urban areas spread out, they become increasingly segregated by income. This paper examines this hypothesis using data covering more than 165,000 block groups within 359 U.S. metropolitan areas for the years 1980, 1990, and 2000. The findings indicate that income inequality-defined by the variance of the log household income distribution-does indeed rise significantly as urban density declines. This increase, however, is associated with rising inequality within block groups as cities spread farther from their central core. The extent of income variation between different block groups, by contrast, shows virtually no association with population density. Accordingly, little evidence supports the notion that urban sprawl is systematically associated with greater residential segregation of households by income.