Transactional sex (TS) is associated with risky sexual behaviors, unintended pregnancy, gender based violence and HIV infection. Proportionally in 2016, TS among young women not in union in Uganda was almost twice in rural areas (16.4%) compared to urban (8.9%) areas. Despite the negative consequences associated with transactional sex, no study in Sub-Saharan Africa Uganda inclusive has provided a detailed account of the contribution of the variations in characteristics and variations in effects of characteristics to the rural-urban gap in transactional sex among young women not in union. This study therefore provides a detailed account of the rural-urban gap in TS by variations in characteristics and variations in effects of characteristics of young women in Uganda. The study utilized data from UDHS 2016 comprising of 1,595 records of young women (15-24 years) not in union (not currently married or living with a man). Statistical analysis was done using a Non-linear Oaxaca’ Blinder Multivariate Decomposition of the logistic regression. In the results, the overall rural-urban gap in TS is significantly attributed to both variations in characteristics (30.7%) specifically total children ever born (-15.2%) and age at first sex (10.3%). TS was also attributed to variations in effects of characteristics (69.3%) of young women specifically variation in effect of highest education (-1,1014.1%) and HIV stigma (-84.3%) (p<0.05). In order to reduce transactional sex especially among young women in rural residence, government and other development partners need to strengthen comprehensive sex-education programs aimed at creating positive attitudes towards HIV, train young women on viable economic activities together with providing them with educational opportunities aimed at delaying sex.

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