Background <p>Health inequality among older adults is a persistent global challenge, yet the role of individual health behaviors in moderating such disparities remains underexplored. This study examines whether physical activity reduces health inequality among older adults in China and investigates the mechanisms through which this effect operates.</p> Methods <p>This study uses data from the 2023 China Longitudinal Aging Social Survey (CLASS 2023). A relative health deprivation index based on self-rated health was constructed to measure health inequality. Tobit regression was used as the main estimation method, and instrumental variable estimation and propensity score matching were employed to address endogeneity concerns. Mediation and heterogeneity analyses were further conducted to examine potential pathways and subgroup differences.</p> Results <p>Physical activity was significantly associated with lower relative health deprivation among older adults. Self-efficacy and social network size were identified as two significant mediating pathways, with the self-efficacy pathway showing a stronger indirect effect. The association was more pronounced among adults aged 80 and above, those with chronic diseases, pension insurance holders, rural residents, and those with lower educational attainment.</p> Conclusions <p>Physical activity is closely associated with lower health inequality among older adults in China, especially among physiologically vulnerable and socioeconomically disadvantaged groups. Policies promoting accessible community-based physical activity may help improve health equity in aging populations.</p>