Background Though institutional delivery plays a significant role in maternal and child health, there is substantial evidence that the majority of rural women have lower health facility delivery than urban women. So, identifying the drivers of these disparities will help policy-makers and programmers with the reduction of maternal and child death. Methods The study used the data on a nationwide representative sample from the most recent rounds of the Demographic and Health Survey (DHS) of four East African countries. A Blinder-Oaxaca decomposition analysis and its extensions was conducted to see the urban-rural differences in institutional delivery into two components: one that is explained by residence difference in the level of the determinants (covariate effects), and the other components was explained by differences in the effect of the covariates on the outcome (coefficient effects). Results The findings showed that institutional delivery rates were 21.00% in Ethiopia, 62.61% in Kenya, 65.29% in Tanzania and 74.64% in Uganda. The urban-rural difference in institutional delivery was higher in the case of Ethiopia (61%), Kenya (32%) and Tanzania (30.3%), while the gap was relatively lower in the case of Uganda (19.2%). Findings of the Blinder-Oaxaca decomposition and its extension showed that the covariate effect was dominant in all study countries. The results were robust to the different decomposition weighting schemes. The frequency of antenatal care, wealth and parity inequality between urban and rural households explains most of the institutional delivery gap. Conclusions The urban-rural institutional delivery disparities were high in study countries. By identifying the underlying factors behind the urban-rural institutional birth disparities, the findings of this study help in designing effective intervention measures targeted at reducing residential inequalities and improving population health outcomes. Future interventions to encourage institutional deliveries to rural women of these countries should therefore emphasize increasing rural women's income, access to health care facilities to increase the frequency of antenatal care utilization.