Despite the relationship between urbanization, energy use and CO₂ emissions has been extensively studied in recent years, little attention has been paid to differences in development stages or income levels. Most previous studies have implicitly assumed that the impact of urbanization is homogenous for all countries. This assumption can be questionable as there are many characteristic differences among countries of different levels of affluence. This paper investigates empirically the effects of urbanization on energy use and CO₂ emissions with consideration of the different development stages. Using the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model and a balanced panel dataset of 99 countries over the period 1975–2005, the findings suggest that the impact of urbanization on energy use and emissions varies across the stages of development. Surprisingly, urbanization decreases energy use in the low-income group, while it increases energy use in the middle- and high-income groups. The impact of urbanization on emissions is positive for all the income groups, but it is more pronounced in the middle-income group than in the other income groups. These novel findings not only help advance the existing literature, but also can be of special interest to policy makers and urban planners.