Preterm birth is associated with a range of childhood morbidities and in industrialised societies is the primary cause of infant mortality. Social and racial inequalities in preterm birth have been reported in North America, UK, Europe and New Zealand. This study utilised population-level data to investigate social and racial inequalities in preterm birth among Aboriginal and non-Aboriginal infants in Western Australia. All live, singleton births between 1984 and 2006 (n = 567 468) were included, and multilevel multivariable logistic regression was used to investigate relative differences in preterm infants between socio-economic groups. Aboriginal and non-Aboriginal infants were analysed separately. The prevalence of preterm births increased from 7.1% in 1984-88 to 7.5% in 1999-2003, before decreasing to 7.2% in 2004-06. Inequalities in preterm births between Aboriginal and non-Aboriginal infants increased over time, with the percentage of preterm births being almost twofold higher for Aboriginal infants (14.8%), compared with non-Aboriginal infants (7.6%). A significant portion of the disparity between Aboriginal and non-Aboriginal infants is attributable to parental socio-economic and demographic characteristics, though the disparity continues to persist even after adjustment for these factors. While the overall rates of preterm birth in Western Australia have remained fairly static over the last two decades, the disparity between Aboriginal and non-Aboriginal infants has increased and is now similar to inequalities seen 20 years ago. These findings highlight a major public health issue that should be of great concern, given the short- and long-term morbidities and complications associated with preterm birth.