This paper analyzes the effect and mechanism of the development of digital financial inclusion on urban-rural income gap based on manually collected county-level data of China over 2014 to 2019. And then it explores the synergistic effects between the development of digital financial inclusion and traditional finance. The results show that: The development of digital financial inclusion can significantly narrow the income gap between urban and rural area, and this effect will be strengthened in areas located in eastern and central regions. Mechanism analysis shows that digital financial inclusion mainly plays the narrowing role through the “income structure optimization effect” and the “loan allocation optimization effect”. Further analysis shows that digital financial inclusion and traditional finance will jointly narrow the income gap. From the perspective of new types of rural financial institutions, the higher the financial availability of rural banks, the stronger the effect that the development of digital financial inclusion has on narrowing the urban-rural income gap. However, this effect is not significant for microfinance companies.