["Review of Development Economics, EarlyView. ", "\nABSTRACT\nChina's carbon peak and carbon neutrality (CPCN) goals signify a profound restructuring of its economy and society, reshaping growth patterns and industrial upgrading. Yet, this low‐carbon transition may also constrain labor income growth. Meanwhile, the digital economy, as an important engine of high‐quality development, offers new opportunities to decouple income growth from carbon emissions through technological innovation and job creation. Using data from the 2016 to 2018 China Migrants Dynamic Survey (CMDS) matched with city‐level carbon emissions and digital economy indicators, this study empirically examines how carbon emissions affect labor income and whether digitalization mitigates these effects. Results show that labor income exhibits an inverted U‐shaped relationship with carbon emissions but that the digital economy both increases income levels and reduces their dependence on carbon‐intensive activities. The dependence of labor income on carbon emissions is stronger in central cities, among medium‐educated groups, and within secondary industries. The digital economy's mitigating role is stronger in the eastern region during the low‐carbon phase but becomes more evident in the central region at higher emission levels, and it more effectively reduces the carbon dependence of labor income among medium‐educated groups and workers in the secondary sector. Moreover, carbon emissions initially widen but later narrow urban–rural and gender income gaps, whereas digital economy development helps to reduce these disparities. These findings provide policy‐relevant insights for balancing climate mitigation and income growth, offering empirical guidance for China and other developing economies pursuing a low‐carbon, digitally driven transition.\n"]