Fresh data sources on cross-national income are examined to document recent changes in the composition of world income inequality within and between nations. New evidence shows that during the 1980s and 1990s the composition of world income inequality experienced a fundamental change, characterized by the diminishing significance of between-nation income differences and the growing prominence of within-nation inequalities. Two competing trends account for this change: (1) steady growth in the average level of income inequality within nations, and (2) a decline in income inequality between nations. These recent trends signify a reversal in one of the major legacies of the Industrial Revolution-the internationalization of world income inequality across national borders. The findings raise important questions for future studies of cross-national inequality and development.