The prevalence of physical domestic violence – violence against women perpetrated by husbands – is staggeringly high across the Indian subcontinent. Although gender-based power dynamics are thought to underlie women's vulnerability, relatively little is known about risk and protective factors. This prospective study in southern India examined the association between key economic aspects of gender-based power, namely spousal employment status, and physical domestic violence. In 2005–2006, 744 married women, aged 16–25, residing in low-income communities in Bangalore, India were enrolled in the study. Data were collected at enrollment, 12 and 24 months. Multivariable logistic regression models were used to examine the prospective association between women's employment status, their perceptions of their husband's employment stability, and domestic violence. Women who were unemployed at one visit and began employment by the next visit had an 80% higher odds of violence, as compared to women who maintained their unemployed status. Similarly, women whose husbands had stable employment at one visit and newly had difficulty with employment had 1.7 times the odds of violence, as compared to women whose husbands maintained their stable employment. To our knowledge, this study is the first from a developing country to confirm that changes in spousal employment status are associated with subsequent changes in violence risk. It points to the complex challenges of violence prevention, including the need for interventions among men and gender-transformative approaches to promote gender-equitable attitudes, practices and norms among men and women.