This paper investigates the role of migration and housing constraints in determining income inequality within and across Chinese cities. Combining microdata and a spatial equilibrium model, we quantify the impact of the massive spatial reallocation of workers and the rapid growth of housing costs on the nationwide income distribution. We first show several stylized facts of the strong positive correlation between migration inflow, housing cost, and imputed income inequality among Chinese cities. We then build a spatial equilibrium model featuring workers with heterogeneous skills, housing constraints, and heterogeneous returns from housing ownership to explain these facts and quantify potential gain from policy reforms. Our quantitative results indicate that the persistent reduction in migration cost, the disproportionate increment in productivity across cities and skills, and the tighter housing constraints in larger cities are the causes of the observed massive migration flow, the rapid growth of housing costs, and the enlarged within/across-city income inequality. Therefore, counterfactuals with land supply increment redistributed by migrant flow could lower the within-city income inequality by 15% and national income inequality by 18%, both measured by Theil Index, while at the same time encourage more migration to high productive cities.