Abstract: Does in-situ urbanization, primarily in the form of county-to-district restructuring, alleviate consumption inequality among rural residents? To explore this issue, this paper first analyzed the impact mechanism of withdrawing counties and setting up districts on rural consumption inequality from the theoretical level, and then constructed a four-period unbalanced panel database consisting of a combination of 281 districts and counties (county-level cities) macro data and 25,744 farm households micro survey data by integrating county macro statistics and China Household Finance Survey (CHFS) micro data. Finally, a multi-period double-difference model was used to empirically analyze the impact of county-to-district restructuring on rural consumption inequality. The study found that, the county-to-district restructuring had a positive effect on alleviating the problem of inequality in consumption among rural residents. Specifically, the policy effectively narrowed the consumption gap among rural residents through dual mechanisms: the income effect and the peer effect. Heterogeneity analysis indicated that, county-to-district restructuring had a more pronounced effect on alleviating consumption inequality in households with less-educated heads and in rural families located in central and western regions. Based on the research findings, the following policy recommendations were proposed: First, further refine the county-to-district conversion policy to enhance its effectiveness. Second, strengthen targeted policy support to amplify income growth effects for rural residents. Third, actively guide and leverage positive peer group effects within rural communities. Fourth, develop and implement regionally differentiated policies tailored to local conditions.