Abstract: The objective of this paper is to apply an inequality composition method, the two-stage nested Theil decomposition method, which is an extension of the ordinary one-stage Theil decomposition method, to an empirical examination of the Chinese regional disparities. One of the innovation of this paper, compared to those previous studies on the same topic, is its multi-scale approach. First of all, the regional inequalities is measured quantitatively in China from 1978 to 2001 by Theil indices based on province-level mean income. Secondly, based on a hierarchical structure of three-level measurement, region-province-prefecture, the paper decomposes overall regional inequality into three components: between-region, between-province, and within-province inequality components. The method uses a prefecture as the underlying regional unit to measure quantitatively overall regional income inequality, rather than a province that is chosen often by the most researchers, and thus can analyze the contribution of within-province inequalities as well as between-province and between-region inequalities to the overall regional income inequalities in a coherent framework. Thus, this paper applies the two-stage nested Theil decomposition method to prefecture-level income and population data in China in 1995,1997,1999 and 2001, and explores the spatial structure of within-provinces inequalities. In the end, to further analyze the results, the three inequality components in 2001 are analyzed in depth separately.Some interesting findings revealed in this study worth further discussion. The most important contribution of recent Chinese regional disparities has been identified with the Theil sub-index of intra-provincial inequalities, which is far more significant than the inter-province and inter-region inequalities components, thus has been recognized as the first and foremost important contributor of recent Chinese regional disparities.