Based on the panel data of 30 provinces and cities in China from 2005 to 2019, this paper empirically tests the relationship between business environment and urban rural income gap using the fixed effect model. The study found that there is a U-shaped relationship between the business environment and the urban-rural income gap. On the whole, the improvement of the business environment is conducive to narrowing the urban-rural income gap. From the perspective of regional heterogeneity, there is still a U-shaped relationship between business environment and urban-rural income gap in the eastern, central and western regions. From the perspective of business environment classification indicators, the relationship between market environment, government environment, international environment and urban-rural income gap is consistent with the whole. The relationship between the rule of law environment and urban rural income gap is not significant. In addition, employment structure and entrepreneurship can negatively adjust the U-shaped relationship between business environment and urban rural income gap, delaying the emergence of U-shaped curve inflection point.