Background Small-area studies of health inequalities often have an urban focus, and may be limited in their translatability to non-urban settings. Using small-area units representing communities, this study assessed the influence of living in different settlement types (urban, town and rural) on the prevalence of four chronic diseases (heart disease, cancer, diabetes and stroke) and compared the degrees of associations with individual-level and community-level factors among the settlement types.

Methods The associations between community-level and individual-level characteristics and prevalence of the chronic diseases were assessed using logistic regression (multilevel and non-multilevel) models. Individual-level data were extracted from the Canadian Community Health Survey (2007–2011). Indices of material deprivation and social isolation and the settlement type classification were created using the Canadian Census.

Results Respondents living in towns were 21% more likely to report one of the diseases than respondents living in urban communities even after accounting for individual-level and community-level characteristics. Having dependent children appeared to have protective effects in towns, especially for males (OR: 0.49 (95% CI 0.27 to 0.90)). Unemployment had a strong association for all types of communities, but being unemployed appeared to be particularly damaging to health of males in urban communities (OR: 2.48 (95% CI 1.43 to 4.30)).

Conclusions The study showed that those living in non-urban settings, particularly towns, experience extra challenges in maintaining health above and beyond the socioeconomic condition and social isolation of the communities, and individual demographic, behavioural and socioeconomic attributes. Our findings also suggest that health inequality studies based on urban-only settings may underestimate the risks by some factors. Ways to devise meaningful small-area units comparable in all settlement types are necessary to help plan effective provision of chronic disease-related health services and programmes on a regional scale.