•Paradigm of the theory of urban bias is an effective tool to understand China's land development policy.•Policy is measured by the extent to which compensation deviates from the market value of expropriated land.•Effect of urban-biased land development on the urban-rural income gap is robust, significant, and positive.•This effect is attributed to an unbalanced urban-rural income growth associated with the land development. Developing countries generally face the challenge of significant urban-rural divides during their process of industrialization and urbanization. Following the paradigm of the theory of urban bias (TUB), this article focuses on the urban-biased land development policy (UBLDP) in contemporary China, which refers that local governments expropriate rural land with the inadequate compensation and use a considerable share of net land revenue to develop urban areas instead of rural areas. On the basis of pointing out three practical facts about and proposing the technique to measure the UBLDP, its influence on the urban-rural income gap (URIG) is investigated by employing the GMM dynamic model along with panel data from Hubei Province over the period of 2010-2016. The results show that a 1% increase in the extent to which compensation deviates from the market value of expropriated rural land (ERL) leads to a 0.46% increase in the URIG, while this effect is attributed to an unbalanced urban-rural income growth associated with the land development. These findings not only generate a broad of direct implications for Chinese policymakers but also provide lessons for other developing countries.