Background: In recent years, the growing prevalence of digital technology has transformed every aspect of life, including mental health care and support. Digital integration—referring to both access to digital technology and the utilization of digital tools in daily life—has the potential to alleviate existing health inequalities, a phenomenon that has been labeled the ‘digital divide’. It is, therefore, imperative to gain an understanding of the mental health dynamics of vulnerable groups in the context of the digital age if we are to develop effective policies and interventions. Objectives: The present study aimed to expand the existing knowledge base on the impact of digital integration on the mental health of low-income populations, with a specific focus on its association with social participation and the contextual variations observed between urban and rural settings. Methods: A total of 930 Chinese urban and rural low-income residents (≥18 years old) were included in the study using data from the Comprehensive Social Survey of Urban and Rural Low-Income Populations in Hubei Province, China, 2022. Multiple linear regression, generalized propensity score matching, causal step regression, and bootstrap methods were adopted to assess the direct impact of digital integration on the mental health of low-income populations, as well as to test the mediating role of social participation. Results: Digital integration was positively associated with the mental health of low-income populations, particularly reducing symptoms of anxiety and depression among low-income individuals, which remains robust even after accounting for potential selective bias. Social participation played a significant mediating role in the relationship between digital integration and the mental health of low-income populations. Heterogeneity analyses indicated that while digital integration has been demonstrated to markedly enhance mental health outcomes among urban low-income groups, this effect has not been observed in rural low-income populations. Conclusions: The present study contributes to the growing understanding of digital integration as a pathway to reducing mental health inequalities. It is imperative that targeted interventions be implemented to enhance digital integration and, in turn, improve mental health outcomes in low-income communities, particularly in rural areas, where the impact is less discernible.