Abstract: Under the background of promoting the integrated development of urban and rural areas and the full arrival of the digital economy era, it is of great significance to explore in depth the relationship between digital economy development and the income gap between urban and rural residents to better solve the unbalanced development of urban and rural areas. Based on the data of 226 cities in China from 2011 to 2021, the entropy weight method is used to find out the level of digital economy development of each city, and the two-way fixed effects model is used to empirically test the impact of digital economy development on the income gap between urban and rural residents. It is found that: ① the impact of the digital economy on the income gap between urban and rural residents shows a U-shaped trend of narrowing and then expanding, and most of the cities in China are located on the right side of the U-shaped curve, and the conclusion is still valid after a series of tests. ② From a regional perspective, the impact of digital economy development on the income gap between urban and rural residents in the eastern, central, western and northeastern regions of China shows a trend of decreasing first and then increasing, and it is found that the eastern region has the largest "inflection point" value, i.e., it has experienced this transformation only at a higher level of digital economy development. ③ Further analysis reveals that the degree of financial activity and the level of human capital can weaken the effect of urban-rural income expansion brought about by the development of the digital economy. Accordingly, it is proposed that, while promoting the development of the digital economy, measures should be taken to bridge the "digital divide" between urban and rural areas, regionally differentiated development strategies should be formulated in accordance with the different stages of development and the actual situation, and financial support and investment in educational resources should be increased, so as to ameliorate the widening of the urban-rural residents' income gap as a result of the impact of the digital economy.