Background: Staphylococcus aureus has been associated with the exacerbation and severity of atopic dermatitis (AD). Studies have not investigated the colonisation dynamics of S. aureus lineages in African children with AD. We determined the prevalence and population structure of S. aureus in children with and without AD from rural and urban South African settings. Methods: We conducted a study of AD-affected and non-atopic AmaXhosa children from rural Umtata and urban Cape Town, South Africa. S. aureus was screened from skin and nasal specimens using microbiological culture, and S. aureus clonal lineages were determined by spa typing. Logistic regression analyses were employed to assess risk factors associated with S. aureus colonisation. Results: S. aureus colonisation was higher in cases compared to controls (60% vs. 21%, p=0.000) and when stratified for location (54% vs. 13%, p=0.000 and 70% vs. 35%, p=0.005 in Umtata and Cape Town, respectively). Severe AD was associated with higher colonisation compared with moderate AD (86% vs. 52%, p=0.022) among urban cases. Having AD was associated with colonisation in both rural (odds ratio [OR] 7.54, 95% CI 2.92–19.47) and urban (OR 4.2, 95% CI 1.57–11.2) children. In rural children, living in an electrified house that also uses gas (OR 4.08, 95% CI 1.59–10.44) or in a house that uses kerosene and paraffin (OR 2.88, 95% CI 1.22–6.77) for heating and cooking were associated with increased S. aureus colonisation, while exposure to animals (OR 0.3, 95% CI 0.11–0.83) as well living in a house that uses wood and coal (OR 0.14, 95% CI 0.04–0.49) and an outdoor fire (OR 0.31, 95% CI 0.13–0.73) were protective. Among urban children, t272 and t1476 dominant among cases but no single spa type dominated among controls. In urban cases, spa types t002 and t442 isolates were only identified in severe AD and t174 was more frequent in moderate AD while t1476 in severe AD. Conclusion: The strain genotype of S. aureus differed by AD phenotypes and rural-urban living. Continued surveillance of colonising S. aureus lineages is key in understanding alterations in skin microbial composition associated with AD pathogenesis and exacerbation.