["Review of Development Economics, EarlyView. ", "\nABSTRACT\nThe relationship between the digital economy and social equity has attracted widespread attention. However, the impact of e‐commerce penetration in villages on rural household consumption inequality remains unexplored. To fill this research gap, this study adopts the staggered difference‐in‐differences (DID) to analyze the impact and the underlying mechanisms, taking the Chinese National Rural E‐commerce Comprehensive Demonstration Policy as a quasi‐natural experiment. We find that e‐commerce penetration in villages significantly reduces rural household consumption inequality, a result that remains robust after conducting a series of robustness checks. Regarding consumption patterns, e‐commerce penetration in villages significantly reduces inequality in survival‐oriented consumption, while its impacts on inequality in hedonistic consumption and development‐oriented consumption are not significant. The regional heterogeneity analysis reveals that e‐commerce penetration in villages significantly reduces the consumption inequality of rural households located in less‐developed counties, while its effect is statistically insignificant in developed counties. The mechanism analysis reveals that e‐commerce penetration in villages decreases rural household consumption inequality through reducing their purchasing transaction costs, income inequality, and digital divide. This study provides insights for addressing rural household consumption inequality in China and other developing countries.\n"]