Based on mathematical analysis, and employing the panel data from 2004 to 2014 years, the present essay investigates the non-linear characteristics and regional differences of the impact of urbanization on the urban-rural income gap at different stages of financial development. Research shows that urbanization inhibits the expansion of urban-rural income gap effectively, and this inhibition with evolving of finance presents the trend of flattened “S” type. When the level of the financial development is below the threshold of 3.90, the inhibitory effect of urbanization on the urban-rural income gap is strong, while above this threshold, the inhibitory effect is relatively weak. Especially in the regions where the level of financial development is relatively low, the inhibition of the development of urbanization to the expansion of the income gap is more significant compared with that in the financially developed regions.

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