An in-depth understanding of the impact of green innovation on the urban–rural income gap is essential for developing countries seeking to address urban–rural imbalances and promote sustainable economic development. This study focuses on China, utilizing provincial panel data from 2007 to 2022, and employs the two-way fixed effects model, the mediating effects model, and the moderating effects model. The study’s key findings are: (1) Green innovation positively reduces the urban–rural income gap. Specifically, the regression results indicate that a one-unit increase in green innovation corresponds to a 0.017-unit reduction in the urban–rural income gap. (2) The heterogeneity analysis reveals that the effect of green innovation on the urban–rural income gap is more pronounced in regions with higher levels of economic development, in non-food-producing areas, and when green utility patents are adopted. Additionally, green innovation narrows the urban–rural income gap predominantly in high-skill regions. (3) Examining the influencing mechanism confirms that green innovation reduces the urban–rural income gap by promoting population urbanization, eco-urbanization, labor force restructuring, and mitigating wage income inequality. (4) The moderating effects analysis indicates that environmental pollution exacerbates the impact of green innovation on the urban–rural income gap; specifically, higher levels of environmental pollution amplify the effect of green innovation in reducing the gap. These findings offer valuable insights for addressing urban–rural income inequality and fostering sustainable socio-economic development in developing countries.