The integration of the digital economy with various sectors of the economy and society is expanding in breadth and depth. Factor mismatch restricts the long-term and stable development of the economy. Based on the panel data of 287 prefecture-level cities in China from 2011 to 2022, this paper calculates the digital economy and urban-rural factor mismatch level, and explores the impact of digital economy on urban-rural factor mismatch. The following conclusions are drawn: 1) The digital economy mitigates factor mismatches in the agricultural and non-agricultural sectors and has significant spatial spillover effects; the digital economy mitigates the factor mismatches in the agricultural sector for the region but exacerbates the mismatches in neighboring regions. With the development of the digital economy, the non-agricultural sector mitigates the factor mismatch in the local and neighboring regions. 2) The digital economy ameliorates factor mismatch in urban and rural areas through the indirect effects of optimizing the employment structure and guiding the flow of production factors via foreign investment, and urbanization, government intervention, and the level of financial development mitigate factor mismatch in both sectors. 3) There is regional heterogeneity in the improvement of urban-rural factor mismatch by the digital economy, and the improvement effect of mismatch in the agricultural sector is the best in the east, followed by the northeast and the west; the improvement effect of mismatch in the non-agricultural sector is the best in the northeast. 4) The digital economy has a double threshold effect for mismatch in the agricultural sector and a single threshold effect for mismatch in the non-agricultural sector, and there is regional heterogeneity. This article makes up for the insufficiency of existing research that focuses mainly on the misallocation of factors among regions. Based on the analysis of the driving forces and entry patterns of the optimal allocation of urban and rural factors, it examines and describes the forms of misallocation of urban and rural factors that exist at the present stage, quantitatively identifies and tests the existence of the misallocation of urban and rural factors and its profound impact on the development of agriculture and rural areas and the welfare of farmers. It also analyzes the deep-seated institutional and mechanism roots, as well as the improvement mechanism for the mismatch of urban and rural factors under the background of the digital economy. Based on the framework of symbiotic development between urban and rural areas, this paper explores the paths for the digital economy to alleviate the mismatch of urban and rural factors from two aspects: the introduction of external factors and the activation of internal factors. The article provides empirical evidence for optimizing the allocation of urban and rural factors.