There is longstanding debate in population policy about the relationship between modern contraception and abortion. Although theory predicts that they should be substitutes, the existing body of empirical evidence is difficult to interpret. What is required is a large‐scale intervention that alters the supply (or full price) of one or the other – and importantly, does so in isolation (reproductive health programs often bundle primary health care and family planning – and in some instances, abortion services). In this paper, we study Nepal's 2004 legalization of abortion provision and subsequent expansion of abortion services, an unusual and rapidly‐implemented policy meeting these requirements. Using four waves of rich individual‐level data representative of fertile‐age Nepalese women, we find robust evidence of substitution between modern contraception and abortion. This finding has important implications for public policy and foreign aid, suggesting that an effective strategy for reducing expensive and potentially unsafe abortions may be to expand the supply of modern contraceptives.