Spatially aggregated data are frequently used for official statistics and by researchers investigating the contextual determinants of health. Results of reporting and analysis vary according to the choice of areal unit. This is the well-known Modifiable Areal Unit Problem or MAUP. Its implication for the monitoring and understanding of area inequalities in health has received little empirical attention in the public health literature. Health differences will likely be smallest across arbitrarily chosen areas whereas boundaries acknowledging the physical and social geography should indicate greater differences between areas. Here we use three methods to define area boundaries and compare the extent of health inequalities across each drawing on data from the London boroughs of Camden and Islington. Irrespective of the boundary definition used, between-area inequalities in obesity, alcohol intake, smoking, walking and self-rated health were small compared with inequalities between individuals. There was a tendency for slightly larger estimated inequalities across areas defined by socioeconomic homogeneity compared with other definitions, but differences between methods were very small in magnitude. Existing studies predominantly use area boundaries that are based on administrative boundaries. Although these have little theoretical basis for the study of neighbourhood inequalities in health, our findings indicate that alternative definitions of the neighbourhood boundaries have no substantive effect on the estimates of those inequalities. Based on these findings, we can have greater confidence in the results of numerous studies which have used administrative boundaries to define the neighbourhood.