Making use of data on age-specific mortality and cause of death patterns for rural and urban areas of Spain during the first third of the twentieth-century, this paper explores the meaning of the ‘urban penalty’ and how it changed over the course of the demographic transition. The author finds ample proof of the existence of this penalty, especially visible among adult males in urban areas, where respiratory and other diseases, many of which were related to urban environments and lifestyles, took their toll on people's health. Despite these disadvantages, mortality decline, for the most part, was also much faster in towns than in the countryside. The author suggests that both the existence of the ‘urban penalty’ and the pioneering role of towns for mortality decline can best be understood in terms of the nature of towns and of urban life, society and government. Copyright © 2001 John Wiley & Sons, Ltd.