Between 1997 and 2012, Paraguay achieved not only remarkable improvements in child nutrition, but also a surprising elimination of the rural-urban differential in child height-for-age Z score (HAZ) and stunting. Our decomposition analysis, applied to four rounds of Paraguayan National Household Surveys, allows us to directly infer not only the contributions of changes in determinants of child nutritional status to the improvements in child nutritional status in rural and urban areas, but also their contribution to closing the rural-urban gap. We find that while common determinants of child nutritional status such as income, maternal education, sanitation, and access to piped water are strongly associated with improvements in child nutrition, they have contributed little to reducing the rural-urban gap (10%, p < 0.05). Improvements in health care utilization, family planning, and demographics have been the main drivers in closing the rural-urban gap in child nutritional status in Paraguay (32%, p < 0.05). The results highlight the potential need for multipronged nutritional strategies that consider the distinct needs of rural and urban communities.