Promoting sustainable development in resource-based regions is an essential issue among policymakers. Yet little is known about the effect of sustainable development strategies on income inequality. Leveraging the implementation of the National Sustainable Development Plan for Resource-Based Cities (2013–2020) (SDP) as a quasi-natural experiment, we adopt a difference-in-differences (DID) approach to investigate the impact of a sustainable development policy on income inequality. This paper finds that the SDP can reduce income inequality by 8.3 percentage points in resource-based cities on average, which is statistically and economically significant. The mediation effect model shows that reducing natural resource dependence is one potential and vital mechanism. Also, we find that the reduction effect of the SDP on income inequality is more pronounced in central and western regions, in growing-type and mature-type resource-based cities, and in energy-based and mineral-based cities. This paper provides valuable policy implications for developing countries to reduce income inequality and promote sustainable development. •The SDP can significantly reduce income inequality in resource-based cities.•Declining natural resource dependence is one potential mechanism.•The reduction effect is pronounced in western regions, in mature-type resource-based cities, and in mineral-based cities.