Income inequality and immigration are two important issues with welfare and policy implications which have long been debated across the political spectrum. This dissertation ventures to shed light on some of the important questions related to income inequality and immigration, such as: What is the current level of inequality among immigrant cohorts; what are the determinants of income inequality of immigrants in the United States; how does the income inequality of immigrants change over time; and what is the impact of immigration on the income distribution of the United States? A cross-sectional regression analysis indicates that the variation in income inequality among immigrant cohorts can be explained by a wide range of variables such as median income, education, age, gender, deprivation, geographical dummies, and visa status. Moreover, the analysis demonstrates that immigrant cohorts exhibit substantial progression in their income inequality over time. The results suggest that the initial level of inequality of recent immigrants in comparison to the U.S. is the most important factor explaining the variation in inequality dynamics. More precisely, immigrant cohorts that have inequality that is remarkably different than the host country's inequality exhibit a faster improvement in equality and they follow a more rapid convergence path to the host country's inequality. Finally, the counterfactual effects of immigrants are investigated by decomposing the surveyed sample of more than three million respondents into natives and immigrants. Income inequality of the population is then calculated in the presence and in the absence of each immigrant cohort. The difference between these figures is presented as the distributional effects of immigrants on U.S. income inequality. The results are striking. Even after controlling for the size of the immigrant cohorts, several other factors are found to be significant for the counterfactual effects of immigrants. The immigrant cohorts that have very low and very high income compared to the U.S. average income have disequalizing effects. The findings of this dissertation provide essential information to policymakers. Based on these findings, immigrants can better be evaluated and immigration policy can be redesigned.