Context: Unplanned readmission within 30 days of discharge is an indicator of hospital quality. Purpose: We wanted to determine whether older rural veterans who were enrolled in the VA had different rates of unplanned readmission to VA or non-VA hospitals than their urban counterparts. Methods: We used the combined VA/Medicare dataset to examine 3,513,912 hospital admissions for older veterans that occurred in VA or non-VA hospitals between 1997 and 2004. We calculated 30-day readmission rates and odds ratios for rural and urban veterans, and we performed a logistic regression analysis to determine whether living in a rural setting or initially using the VA for hospitalization were independent risk factors for unplanned 30-day readmission, after adjusting for age, sex, length of stay of the index admission, and morbidity. Findings: Overall, rural veterans had slightly higher 30-day readmission rates than their urban counterparts (17.96% vs 17.86%; OR 1.006, 95% CI: 1.0004, 1.013). For both rural- and urban-dwelling veterans, readmission after using a VA hospital was more common than after using a non-VA hospital (20.7% vs 16.8% for rural veterans, 21.2% vs 16.1% for urban veterans). After adjusting for other variables, readmission was more likely for rural veterans and following admission to a VA hospital. Conclusions: Our findings suggest that VA should consider using the unplanned readmission rate as a performance metric, using the non-VA experience of veterans as a performance benchmark, and helping rural veterans select higher performing non-VA hospitals.