Induction of labour is associated with a reduction in caesarean delivery, but the mechanism of action and which groups of women might benefit remain unknown. To assess the association between induction of labour at 38-39 weeks pregnancy, and caesarean delivery: (i) overall; (ii) for slow progress in labour; and (iii) for suspected fetal compromise. Retrospective observational study in two Sydney hospitals from 2009 to 2016, among nulliparous women with induction of labour at 38 or 39 completed weeks pregnancy and a singleton, cephalic presenting fetus. The comparator was all planned vaginal births beyond 39(+1/7) weeks, whether or not labour was induced. Binary and multinomial multiple logistic regressions adjusting for multiple confounders were performed. There were 2388 and 15 259 women in the study and comparison groups respectively. Induction of labour was associated with caesarean delivery overall only for women <25 years of age (adjusted odds ratio 1.63; 95% CI 1.17-2.27) and was not associated with caesarean delivery for slow progress. Induction of labour was positively associated with increased caesarean delivery for suspected fetal compromise among young women (<30 years), with the association weakening as maternal age increased. The association between induction of labour and caesarean delivery was different for slow progress compared with suspected compromise (P = 0.005). Induction of labour has different effects on the likelihood of caesarean delivery for slow progress and for suspected fetal compromise. Women <30 years of age are at higher risk of caesarean delivery for suspected fetal compromise, potentially due to uterine hyperstimulation. © 2019 The Royal Australian and New Zealand College of Obstetricians and Gynaecologists.