Global initiatives have caused renewed interest in the efficiency of aid and its impact on poverty. Whilst growth effects of foreign aid have extensively been analyzed, less attention has been paid to the distributional effect of aid. This paper aims to investigate the potential moderating effects of foreign aid on within-country income inequality using econometric analysis. Employing unbalanced panel data on 42 countries in the period 1990–2017, and conducting a multivariate regression analysis, this study finds no robust empirical support for the positive effects of foreign aid on income inequality.