Existing literature on regional income inequality in China has paid little attention to rural households, especially those in less industrialized rural areas. This study uses the data from a sample survey conducted in April 2007 on 1251 rural households from 11 villages of Henan, the largest less developed agricultural province in China, to examine rural inequality and factors contributing to rural income. It is found that rural income at the household-level was significantly different across rural villages and among rural households within a village. The Gini indices for all sample villages were over 0.39, and even over 0.4 for some villages. The income per capita in the poorest 10% of households only accounted for one thirty-seventh of that in the richest 10%. A quantitative modeling analysis indicates that regional factors, such as cultivated land area, landform types, farming structure, location as measured by distance from the closest county seat, transportation, and non-agricutural development have all played a significant role in explaining the difference. Furthermore, different factors have been found in villages with different income levels. In the lower income group of households, the cultivated land area was more important than other factors, implying that people in those families heavily relied on grain farming. In comparison, the agricultural types contributed more significantly to income for the households in the medium income group, while economic background, non-agricutural development level, geographical location, and transportation were more sensitive to income level in the households of high income group. This finding leads support to the hypothesis that the factors affecting rural development differ in different stages of development. The results of this study also provide a comparison with another study in the same province but based on township-level administrative areas. Most conclusions are consistant notwithstanding; this study provides some further factors improving understanding of rural development.