Pollution and inequality are inextricably linked. While environmental regulations are imperative to abate emission and protect people from pollution, they might excessively burden the poor. Despite the growing importance of this topic, there is no clear answer to the relationship between environmental regulations and income inequality. Using an ongoing, open cohort longitudinal China Health and Nutrition Survey data, this paper examines how an environmental regulation aiming to abate SO2 alters the income distribution. We find that environmental regulations have significantly reduced income inequality. However, the improvement in income distribution is achieved by the fall of wage incomes of high-income groups.