This paper uses data from 31 provinces and municipalities in China from 2016 to 2018 and a fixed‐effects model to study the impact of education expenditures on income inequality between urban and rural residents. The study found that the increase of the per capita cultural, educational and entertainment expenditure gap between urban and rural residents will aggravate income inequality, and under different levels of government governance, urban and rural residents' educational expenditures have different effects on the urban‐rural income gap; the increase in fiscal education expenditures will narrow urban and rural areas. Income gap; under different levels of government governance, the impact of each control variable on urban‐rural income inequality is different. Based on empirical results, In order to play the role of education expenditure in narrowing the income gap between urban and rural areas, not only families or individuals need to pay more attention to education, but also the government needs to increase financial investment in education. Only when the level of government governance is effectively improved can education expenditures play a greater role in narrowing the urban‐rural income gap.