<p>Global climate change is exacerbating income inequality between countries and regions. China’s ongoing low-carbon transition will inevitably have profound effects on income distribution. Based on panel data consisting of 289 Chinese cities from 2005 to 2022, this study constructs an income inequality index of cities by utilizing district and county level nighttime light data, and empirically estimates the impact of Low-Carbon City Pilot Policy (LCCPP) on income inequality using a staggered DID model. The results suggest that LCCPP significantly reduces income inequality in cities, with policy effects strengthening over time. The policy’s effects are more pronounced in non-resource-based cities, cities with smaller initial income gaps, and cities with stringent environmental regulations. Mechanism analysis shows that job creation, mitigation of wage skill premium, and promotion of digital inclusive finance are key channels. Further analysis indicates that CO₂ emissions, green finance development, and human capital levels play positive moderating roles. Our findings provide evidence that climate policies can achieve both emissions reductions and equity, offering valuable insights for addressing climate change and income inequality.</p>