Abstract: Based on the panel data of 31 provinces in China from 2013 to 2022, the digital economic development index is constructed using the entropy method and linear weighting. And the dynamic nonlinear panel model and moderation effect model are employed to analyze the impact of digital economic development on the urban-rural income gap and its mechanisms. The results show that: (1) Overall, the development of the digital economy at the current stage is exacerbating the income gap between urban and rural areas. Nonlinear effect analysis indicates that there is an inverted U-shaped relationship between digital economic development and the urban-rural income gap. Before reaching the turning point, the development of the digital economy has exacerbated income inequality. Once the turning point is crossed, the development of the digital economy helps to narrow the income gap between urban and rural areas. (2) The impact of digital economic development on the urban-rural income gap shows heterogeneity. First, the impact of different dimensions of digital economic development on the urban-rural income gap varies greatly, among which digital industrialization presents an inverted U-shaped relationship. Second, there are differences among regions, and the turning point of the digital economy in the eastern region is higher than that in other regions. (3) The digital inclusive finance acts as a moderator in the inverted U-shaped relationship, shifting the turning point leftward.