Background <p>The excessive urban‒rural income gap has been one of the main challenges facing developing countries. The establishment and improvement of health insurance is conducive to narrowing the income gap.</p> Methods <p>On the basis of the quasinatural experiment of urban–rural health insurance integration in China, we investigate the impact and mechanism of action of health insurance integration on the urban–rural income gap using the staggered difference–in-differences (DID) model.</p> Results <p>The research findings empirically indicate that health insurance integration has narrowed the urban–rural income gap by a large margin (average treatment effect on the treated (ATT)=-0.013, <i>p</i> &lt; 0.01). The heterogeneity analysis reveal that in the central and western regions and in cities with large urban‒rural income gaps and high fiscal expenditure ratios, the policy effect of health insurance integration is more pronounced. Further research into the income effects of health insurance integration reveals that health insurance integration can increase the income growth of rural residents but has no significant influence on that of urban residents. We also observe through mechanism analysis that health insurance integration can narrow the urban‒rural income gap by improving rural residents’ health.</p> Conclusions <p>This study indicates that health insurance integration is an effective means of narrowing the urban‒rural income gap. The research findings of this paper provide empirical evidence for how to optimize the income distribution pattern through the reform of health insurance.</p>