This paper discusses the income gap between urban and rural residents in China.Urban and rural residents constitute the two basic groups of our society.The income gap between urban and rural residents becomes much wider since reform and opening.The excessive rural-urban income gap becomes a major bottleneck in economic development,affecting social justice and stability.This paper studies the rural-urban income gap in China from "cointegration analysis" and "the impulse response and the impact of decomposition based on VAR model",and then to put forward reasonable proposals to narrow the income gap between urban and rural residents in China.