This paper presents the first quantitative analysis of gender disparities in selfemployment in urban China. It documents the extent of gender income inequality in selfemployment. By disaggregating self-employment into three occupational classes, it shows the gender segregation within self-employment—women were concentrated in the financially least rewarding segment—and identifies it as a main source of the gender income inequality. It examines a range of determinants of participation in self employment—family structure, family background, and career history—and how their gender-specific effects contributed to gender segregation. Although using data from a 1996 national survey, this study captures two key processes that shaped the structure of self-employment in contemporary urban China: the restructuring of the state sector and the growth of financial returns and social status in private sector, both of which contributed to the formation of gender segregation in self-employment.