Urbanization is currently a major force in tropical land use transitions as economic activities aggregate in urban centers, particularly in Asia. This paper examines relationships among urbanization, household energy source, and forest cover at the state level in India using available census, survey, and remote sensing analysis from the 1990s and 2000s. Central questions include (1) how rapidly are urban and rural households switching from traditional to modern fuel sources; and (2) what are the consequences of changing household energy sources for fuelwood demand and forest cover. Country-wide, 30 and 78% of urban and rural households respectively used fuelwood for cooking in 1993. In urban households, the percentage decreased to 22% by 2005 with a shift towards liquefied petroleum gas (LPG). The shift occurred across almost all income classes. In rural areas, the use of LPG increased fourfold but 75% of households still rely on fuelwood. Despite the decline in percentage households using traditional fuels, fuelwood demand continued to increase from 1993 to 2005 at a national scale due to an increasing total number of households. However, 25% of states and union territories experienced declines in rural fuelwood demand and over 70% declines in urban fuelwood demand. Forest cover has remained steady or increased slightly over the time period, reaffirming the conclusion that fuelwood demand may lead to local degradation but not large-scale deforestation. At the state level, increases in percent forest cover between 2000 and 2004 are positively associated with percent of total households that are urban (corresponding to fewer percentage households using wood) but not related to changes in fuelwood demand. Plantations are a primary cause of increases in forest area, where benefits to ecosystem services such as biodiversity and hydrologic function are controversial. Results suggest that households will continue to climb the energy ladder with future urbanization, resulting in substantial development benefits and reduced exposure to indoor air pollution. Implications of reduced fuelwood demand for forest cover are less certain but the limited data suggest that urbanization will promote a transition to increasing forest cover in the Indian context.