Rural development initiatives across the developing world are designed to improve community well-being and livelihoods. However they may also have unforeseen consequences, in some cases placing further demands on stretched public services. In this paper we use data from a longitudinal study of five Ethiopian villages to investigate the impact of a recent rural development initiative, installing village-level water taps, on rural to urban migration of young adults. Our previous research has identified that tap stands dramatically reduced child mortality, but were also associated with increased fertility. We demonstrate that the installation of taps is associated with increased rural-urban migration of young adults (15–30 years) over a 15 year period (15.5% migrate out, n = 1912 from 1280 rural households). Young adults with access to this rural development intervention had three times the relative risk of migrating to urban centres compared to those without the development. We also identify that family dynamics, specifically sibling competition for limited household resources (e.g. food, heritable land and marriage opportunities), are key to understanding the timing of out-migration. Birth of a younger sibling doubled the odds of out-migration and starting married life reduced it. Rural out-migration appears to be a response to increasing rural resource scarcity, principally competition for agricultural land. Strategies for livelihood diversification include education and off-farm casual wage-labour. However, jobs and services are limited in urban centres, few migrants send large cash remittances back to their families, and most return to their villages within one year without advanced qualifications. One benefit for returning migrants may be through enhanced social prestige and mate-acquisition on return to rural areas. These findings have wide implications for current understanding of the processes which initiate rural-to-urban migration and transitions to low fertility, as well as for the design and implementation of development intervention across the rural and urban developing world.