Abstract: Farmers’ digital capability is an important condition for transforming the achievements of digital rural development into income-generating opportunities. Using survey data from 1,058 rural households in southern Jiangsu Province, this study examines the relationship between digital capability and farm household income and its potential channels, and further analyzes income diversification and income distribution. The results show that: 1) Digital capability is significantly and positively associated with per capita household income. The internal instrumental variable estimates and multiple robustness checks yield results in the same direction, and the coefficients of both digital technology access and digital technology use are significantly positive. 2) Digital capability is positively associated with participation in non-farm employment and digital platforms, with the latter measured by online shopping frequency, providing support for two potential income-enhancing channels. 3) In the subgroup estimations, the coefficient of digital capability is significantly positive for both gender groups and both education groups, while its statistical significance differs across age, household-size, and cooperative-membership groups. 4) Rural households with stronger digital capability have more dispersed income shares across sources and lower levels of individual relative deprivation, while the estimated coefficients are numerically larger at lower income quantiles. Accordingly, policies should improve access to digital technologies in rural areas, strengthen farmers’ digital skills training, expand the application of digital technologies in employment and business activities, and provide differentiated support for different groups.