This paper provides new insights into how oil rent affects income inequality in 52 developed and developing economies over the period 1984-2008. After taking into consideration the endogeneity aspect, the analysis yields three key findings. First, the effect of oil rent on income inequality is non-linear. Oil productivity wealth induces a decline in income inequality for countries for which the share of oil rent in percentage of GDP is below the threshold of 25%. Above this threshold, we document a positive relationship. Second, the effect of oil rent is heterogeneous across countries, depending upon the institutional quality. Specifically, we find that the decline in income inequality is lower in countries with high corruption, low accountability and weak regulatory quality. Finally, we uncover a time-dependent relationship between oil rent and income inequality. In the short run, the effect of oil rent is negative while in the long run, the opposite is observed.