In the Chinese cities, migrants have been treated differently from urban locals in varied aspects because of their rural or non-local hukou (household registration) status. But the existing literature provides little understanding on how migrant workers' welfare entitlements and benefits are affected by discrimination and institution in the urban labour market. On the basis of an extended analytical framework that examines not only the segregation between urban locals and rural migrants but also the segregation between locals and non-locals, this paper investigates the discrimination against migrant workers in employment-based benefits in four megacities. The results show that there are gradient differences in access to overall and individual items of benefits among urban locals, urban migrants, and rural migrants. More than half of the benefit disparities between urban locals and migrant workers are caused by discrimination against the latter, implying that the hukou system still plays a role in segmenting China's urban labour market. Urban migrants and rural migrants suffer similar extent of discrimination when they are compared with urban locals, suggesting that urban labour market segmentation is currently dominated by the segregation between locals and non-locals rather than by the segregation between urban locals and rural migrants that was observed in the earlier stage of reforms. In addition, this study suggests that previous studies focusing on the mean wage may have underestimated the extent of discrimination against migrants.