This study examines the relationship between e-government and income inequality. Empirical analysis is carried out for a global sample of 99 countries from 2003 to 2019. Overall, when e-government development increases by 0.1 units, the Gini index tends to fall by about 0.1–0.3 percentage points. Among the dimensions of e-government, online services and telecommunication infrastructure are found to have significant negative relationships with various measures of income inequality. The study proposes and tests two potential channels: institutional quality, and new economic activities. We provide consistent evidence showing that e-government development can stimulate new business registration while improving corruption control, thereby reducing income inequality. Further analyses of two subsamples by income level yield similar findings, with a more consistent influence in high-income countries. Our findings indicate that e-government development can enhance institutional quality, facilitate a favorable environment for new businesses, and ultimately contribute to a more inclusive society. The findings suggest the need for global strategies to accelerate the adoption of e-government, especially support for the implementation of e-government in developing countries.