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INTRODUCTION: Many studies have demonstrated that health is a function of relative and not absolute income within populations. Canadian studies are not conclusive; most indicate that there is no relationship between income inequality and health within Canada. There is a need for further investigation into the validity of the 'relative income' hypothesis in the Canadian population. The primary objective of this research was to test the 'relative income' hypothesis across Canadian health regions. The second objective was to extend the hypothesis to consider rural versus urban populations. METHODS: This research involved ecological analyses. The source of the data was the Canadian Community Health Survey, Cycle 3.1. The units of analysis were Canadian health regions. Health of a region was estimated as the percentage of people who rated their health as good or excellent. The primary exposure variable was the ratio of people whose personal income was less than $15,000 relative to those reporting more than $80,000 in the year preceding the survey. This ratio provided a measure of the distribution of income. The main covariates were ecological measures of socio-demographic variables, social capital, substance use behaviours (smoking and alcohol consumption), rural/urban status of the region, and absolute income in the region. Correlation analyses and multiple linear regressions were performed to ascertain the relationship between income inequality and population health, adjusting for important covariates. RESULTS: The measure of income inequality alone appeared to explain 18% of the variability in the measure of population health. However, after adding the measure of absolute income to the model, although 29% of the variability was explained, the independent contribution of the inequality measure became non-significant. Linear regression models suggested that the absolute income variable alone could explain 30% of the variance in the health status of populations. Other variables with a statistically significant contribution to the final model were education and alcohol consumption. The effect of rural/urban geographic status on the relationship of interest was similar to other covariates. This variable did not change the individual relationship between income inequality or absolute income and the measure of population health status. In both rural and urban regions, absolute income and education had positive effects on population health. In urban regions alcohol consumption was a significant negative contributor to population health status; whereas, in rural regions, smoking status had a significant negative effect on population health status. CONCLUSION: Across Canadian health regions, health status in populations was a function of absolute income but not relative income. Regions with higher levels of education had better levels of self-rated health. A larger percentage of heavy drinkers was also correlated with lower population health status. Findings were consistently observed in rural and urban populations. The study findings have implications for public health, economic, and social policies. [ABSTRACT FROM AUTHOR]