In a displacement reaction, an element displaces another element from its compound. For example: Fe₂O₃ + 2Al → Al₂O₃ + 2Fe, where aluminium displaces iron from iron oxide.

In a double displacement reaction, two different atoms or groups of atoms (ions) are exchanged between the reactants. Such reactions involve an exchange of ions and often produce insoluble salts (precipitates). For example, when solutions of lead(II) nitrate and potassium iodide are mixed, ions are exchanged forming a precipitate.

The main difference is that displacement reactions involve one element replacing another in a compound, whereas double displacement reactions involve exchange of ions between two compounds.