This study examines the segregation of rural migrants in post-reform Chinese cities. We shed light upon the extent of segregation and investigate its dynamics and effects. Historically, the residential structure of socialist urban China was homogeneous, with few rural migrants in cities. After the so-called ‘open-door’ and market-oriented reforms beginning in the late 1970s, the socio-spatial landscapes of large Chinese cities such as Beijing, Shanghai and Guangzhou have been utterly transformed. Using the fifth (2000) and sixth (2010) Chinese national censuses, we measured the extent of residential segregation in Shanghai, Guangzhou and Shenzhen and identified areas of migrant segregation. The accumulation of rural migrants mainly appears in and near suburbs, forming a circular pattern around the city center. The determinants of this segregation include principally institutional forces such as household registration (hukou) status and property rights, as rural migrants often accumulate and are segregated, voluntarily or involuntarily, into so-called urban villages or worker enclaves. We found both positive and negative effects of this segregation: urban villages not only provide necessary affordable housing for rural migrants, but they also help migrants to construct social networks, accumulate social capital, and improve their residential satisfaction, psychological attachments and overall well-being. We show that urban villages are by no means truly segregated, and that the segregation of rural migrants can be transient. In contrast, worker enclaves, though formally managed and organized, are in fact gated camps, detached from the local society, bringing about psychological problems among rural migrants and potential social crisis.