This study assessed the relation between payment source and cesarean section use by analyzing California data on hospital deliveries. Of 461,066 deliveries in 1986, cesarean sections were performed in 24.4 percent. Women with private insurance had the highest cesarean section rates (29.1 percent). Successively lower rates were observed for women covered by non-Kaiser health maintenance organizations (26.8 percent), Medi-Cal (22.9 percent), Kaiser (19.7 percent), self-pay (19.3 percent), and Indigent Services (15.6 percent). Vaginal birth after cesarean (VBAC) occurred more than twice as frequently in women covered by Kaiser (19.9 percent) and Indigent Services (24.8 percent), compared to those with private insurance (8.1 percent). Sizable, although less pronounced, associations between payment source and cesarean section use were noted for the indications of breech presentation, dystocia, and fetal distress. Accounting for maternal age and race/ethnicity did not alter these findings. Variations in the use of cesarean section have a substantial financial impact on health care payors.