Based on the controlled variables, such as human capital, industrial structure, investment in fixed assets and foreign trade, this paper uses provincial panel data from 1987 to 2010 of the inter-regional and urban-rural areas to test the impact of foreign direct investment (FDI) on the income gap. Empirical results show that: FDI has been a positive effect on regional income disparity.The U-shape Curve does not exist between FDI and the income gap between regions. However, the results show that the U-shaped relationship between FDI and urban-rural residential income gap exists. Firstly FDI intensified the urban-rural residential income gap, but as time goes by, FDI can narrow it.