Securing water supply in the face of increasing water scarcity is one important challenge faced by humanity in sustainable development. Inter-basin water transfer is widely applied to provide water supply security in regions where water demand exceeds water availability. However, the effect of inter-basin water transfer on alleviating water scarcity and its inequality is poorly understood especially at the national scale. Based on a newly compiled database of inter-basin water transfer projects in China, here we report a first national assessment of their effect on securing water supply in different basins. We developed a number of indices to facilitate quantifying the effect of water transfer on water scarcity and its inequality. The capacity of inter-basin transfer projects has been steadily increased, which achieved ~48.5 billion m³ yr⁻¹ by 2016 (equivalent to ~8% of the national water use). The results indicate that water transfer has impacted water supply of 43 sub-basins out of a total of 76 sub-basins, but it hardly changes a basin's water scarcity level (e.g., from water scarcity to low water scarcity). Approximately three quarters of people in China are affected by water transfer. More than a half of the national population (705 million) benefit from alleviated water scarcity, leading to the inequality coefficient reduced from 0.64 under natural water availability condition to 0.59 considering water transfer in 2016. However, 357 million people in water transfer source basins are subject to increased water scarcity, in which ~21% are from water stressed sub-basins. This study reveals for the first time water transfer induced water scarcity and inequality change across sub-basins in China, and highlights the challenges to secure water supply across basins.