Abstract: Narrowing the urban-rural residential consumption gap is the major means of promoting domestic circulation of China, and the inevitable requirement of achieving common prosperity. Based on China’s provincial panel data from 2011 to 2020, this paper analyses digital economy’s impact, its internal mechanism and spatial spillover effects on the urban-rural residential consumption gap. This paper finds that, digital economy can effectively narrow the urban-rural residential consumption gap, but the narrowing effects have significant consumption type and rural human capital heterogeneities. Specifically, compared to urban-rural survival-oriented consumption gap, digital economy can effectively narrow the urban-rural developing and hedonic consumption gap; compared to areas with low rural human capital, digital economy’s narrowing effects on the urban-rural residential consumption gap are more obvious in areas with higher rural human capital. Based on internal mechanism, digital economy can narrow the urban-rural consumption gap by promoting the rural industrial revitalization and narrowing the urban-rural digital divide. Further spatial econometrics analysis shows that digital economy can also narrow the urban-rural residential consumption gap in surrounding areas through spatial spillover effects. Therefore, it is recommended to narrow the digital economy development gap between regions, shore up the digital weak links of rural industries and bridge the urban-rural digital divide to enhance digital economy development’s narrowing effects on the urban-rural residential consumption gap.