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In order to promote green and low-carbon transformation, China has gradually carried out the pilot policy of low-carbon cities. In the process of promoting common prosperity, the impact of the implementation of this pilot policy on income inequality needs to be further studied. First, this research established a theoretical model to analyze the impact of the low-carbon city pilot policy on income inequality and its mechanisms. Then, using the panel data of 271 cities at prefecture level and above in China from 2006 to 2021, the Dagum Gini coefficient was constructed, and a quasi-natural experiment was conducted using a progressive difference-in-differences model. The results showed that: 1 The low-carbon city pilot policy could suppress income inequality. Since the implementation of this policy, income inequality in the pilot areas had decreased by an average of 0.9% compared with non-pilot areas during the experiment period. 2 The impact of the low carbon city pilot policy on restraining income inequality was realized through the mechanism of environmental governance investment and that of green technology innovation. 3 Heterogeneity analysis showed that the impact of the low-carbon city pilot policy on regional income inequality was significantly different due to differences in initial income distribution endowment, labor resource allocation, and carbon intensity. The impact of the low-carbon city pilot policy on income inequality was better in pilot areas with low initial income distribution endowments and insufficient labor resources. It had no obvious impact on the pilot areas with high carbon intensity. 4 Further research showed that the low-carbon city pilot policy could improve the common wealth index of pilot areas. Since the implementation of the policy, the common wealth index in pilot areas had increased by an average of 0.5% compared with non-pilot areas during the experiment period. Based on the above research findings, this study suggests that: we should continue to promote the low-carbon city pilot policy and deepen the social green and low-carbon transformation; improve the mechanism of regional environmental governance investment and enhance the level of regional green technology innovation; identify the distribution structure of regions with unbalanced income and guide labor flow in regions with misallocation of resources; and pay attention to employment problems in regions with high carbon intensity. [ABSTRACT FROM AUTHOR]