Based on China’s provincial panel data from 1998 to 2017, this paper analyses the degree of income inequality and its influencing factors at the level of province, the author focuses on the effects of technological innovation and market segmentation on income inequality. The results show that Gini coefficient is relatively high in the sample period, and shows a trend of rising first and then decreasing. There is a U shape relationship between regional income gap and technological innovation. At present, the effect of knowledge spillover exceeds the effect of skill premium which makes technological innovation to narrow the regional income gap. Market segmentation will not only aggravate regional income inequality, but also indirectly weaken the mitigation effect of innovation on income gap by hindering technological innovation. There is an inverted U-shaped relationship between the degree of regional income inequality and the level of economic development. Increased trade dependence, years of education per capita and social security expenditure per capita contribute to narrowing the regional income gap, the increase of industrialization rate will aggravate the regional income gap, the effect of fiscal expenditure on regional income gap is not obvious. The results of dynamic panel model show that the regional income gap has inertia characteristics. Finally, based on the conclusions of the study, the author gives targeted policy recommendations.