Unmet need for family planning (FP) is a global public health concern, particularly in low- and middle-income countries. In Ethiopia, although several studies have assessed unmet needs for FP, there have only been few empirical investigations into regional inequalities and their contributory factors. This study assessed urban-rural inequalities in unmet FP needs among reproductive-aged women in Ethiopia and particularly examined the contribution of material, cultural-behavioral, and psychosocial factors therein. A cross sectional study was conducted among 8811 reproductive-aged women derived from the nationally representative 2019 Ethiopian Performance Monitoring for Action (PMA) data. The outcome variable was unmet need for FP. The exposure variable was place of residence (urban or rural). Contributing factors were categorized into material, psychosocial and cultural-behavioral factors. Blinder-Oaxaca decomposition analysis was used to assess urban-rural inequalities in unmet need for FP as well as to disentangle the contributory factors in percentage points. In our study, 13.8% of reproductive-aged women in Ethiopia reported unmet FP needs. Urban-rural inequalities therein accounted for 6.8% points. Disparities in FP needs between urban and rural areas were mostly explained by psychosocial factors (81.0%) followed by material (21.0%), and cultural-behavioral (3.2%) factors. While women who were living with a partner (39.1%, p < 0.01) and multiparas (51%, p < 0.01) contributed to increasing inequalities, attending family planning counseling services with a healthcare provider (-1.7%, p = 0.03) reduced the gap in unmet need for FP between urban and rural areas. Women from the poorest and poor category contributed 14.1% (p = 0.02) and 11.1% (p = 0.04), respectively. Being from a Muslim religion also contributed to the disparity by 7.3% (p < 0.01). This study showed that among reproductive-aged women in Ethiopia, inequalities in unmet FP needs show distinct urban-rural patterning. Most inequalities could be attributed to psychosocial factors, mainly parity and marital status, followed by material and cultural-behavioral factors. Policymakers should target these modifiable psychosocial factors to reduce urban-rural inequalities in unmet need for FP in Ethiopia.