Living in a high-density urban environment may be good for people’s health and well-being and standard of living but it may also have disadvantages. The international literature debates the extent to which urban living carries a premium or a penalty. Child growth and development indicators are good measures for assessing this. Using the National Income Dynamics Study (NIDS) database, we take the example of child stunting to investigate the spatial inequalities between urban formal, urban informal and rural areas in South Africa. The figures for child stunting in South Africa are considerably lower than those for other countries in sub-Saharan Africa but this is not a cause for complacency. We found an urban premium for male child stunting when comparing urban formal and rural areas, but an urban penalty for male child stunting when comparing urban informal and rural areas. The paper calls for a renewed focus on managing urbanization in South Africa.