Over the past four decades, advances in technology and trade have made global production more fragmented and interconnected, forming Global Value Chains (GVCs). This new production and trade structure creates winners and losers within countries. While GVC participation can increase value-added and reduce inequalities, it can also reinforce existing disparities depending on how gains are distributed. Understanding this relationship is important for designing policies that promote more equitable income distribution. This study analyzes the relationship between a variety of different GVC participation indices and inequality and explores heterogeneity in this relationship depending on the development level of countries, with a dataset covering 55 countries from 2000 to 2022. Our results indicate that all kinds of forward and backward GVC participation are negatively associated with income inequality. This result is primarily driven by developing countries. This suggests that more and deeper involvement in GVCs can contribute to a more equitable income distribution, particularly in developing countries. In addition, capital intensity, R&D expenditure as a share of GDP, and secondary school enrollment rate are also negatively correlated with inequality. Moreover, GDP per capita displays an inverted-U relationship with inequality, providing evidence for the Kuznets curve hypothesis. All these findings emphasize the critical role of GVC participation as well as physical, human capital, and R&D expenditure in shaping more equitable income distribution within countries.