["Review of Development Economics, EarlyView. ", "\nABSTRACT\nThis study, based on a sample of 1037 field surveys, empirically investigates the impact of digital literacy on consumption inequality among rural residents and the underlying mechanisms. The key findings are as follows: First, digital literacy significantly reduces consumption inequality, and this conclusion holds even after conducting robustness and endogeneity tests. In particular, we use instrumental variable methods, alternative regression models, and different specifications of dependent and independent variables. Second, the mechanism analysis reveals that digital literacy reduces consumption inequality by improving the consumption levels of low‐income and low‐social‐capital rural residents, narrowing income gaps, alleviating liquidity constraints, and promoting digital payment adoption. Third, heterogeneity analysis shows that the mitigating effect of digital literacy is more pronounced for rural women and households with high dependency burdens. Furthermore, digital literacy has a stronger effect on alleviating consumption inequality among rural residents experiencing low and moderate levels of consumption deprivation, with a more significant impact on survival and development‐related consumption inequalities than on enjoyment‐related consumption inequalities. However, further research finds that digital literacy may also lead to excessive consumption among rural residents.\n"]