Chinese internal migrants without a local hukou (household registration) are often discriminated against in the urban labour market. This study examines the impacts of such discrimination on wage differentials and the distribution among urban locals, urban migrants and rural migrants. It uses an extended analytical framework of segmented labour market to examine the multiple segmentations between urban residents and rural migrants and between locals and non-locals. The results show that, compared with urban locals, rural migrants only face discrimination above the medium-wage level, while urban migrants face discrimination below the medium-wage level, but to a much lesser degree. Owing to structural differences in employment, urban locals (rather than migrant workers) are discriminated against at other wage levels. The results suggest that the hukou system still plays an important role in segmenting China’s urban labour market. The degree of discrimination against urban migrants relative to urban locals is greater than that against rural migrants relative to urban migrants. This suggests that nowadays China’s urban labour market is mainly characterised by the segmentation between locals and non-locals, rather than the segmentation between urban residents and rural migrants, which was the case in the past.