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In the digital age, Internet use has become important for relative poverty governance and common prosperity in China. “Internet + targeted poverty alleviation” is an essential boost to poverty alleviation that has experienced empirical tests. Academics have also paid attention to the poverty reduction effect of Internet use. On the one hand, existing studies mainly focus on its effect in rural areas, while relative poverty exists widely between urban and rural areas. Therefore, further comparison of the urban-rural differences in their poverty reduction effect is necessary. On the other hand, promoting capital accumulation is the fundamental mechanism of the poverty reduction effect of Internet use, which academics have poorly analyzed. Using the Chinese General Social Survey(CGSS)data in 2017, this paper uses the moderating effect, mediating effect, moderated mediating effect, and threshold effect models to examine the poverty reduction effect of Internet use and the urban-rural difference in its capital accumulation mechanism. The results find that Internet use can alleviate the relative poverty of individuals and has a more significant effect on rural residents than urban residents. Moreover, the results remain robust after overcoming the endogeneity problem using the instrumental variables model. Further mechanism analysis reveals that Internet use can transform online resources into offline human, social, and economic capital, thus alleviating relative poverty. Among them, the poverty reduction effect of human capital accumulated by Internet use is stronger for urban residents, and the poverty reduction effect of economic capital is more substantial for rural residents. Meanwhile, there are threshold conditions for human capital, economic capital, and social capital for the poverty reduction effect of Internet use. Furthermore, there are urban-rural differences in the threshold values. The contribution of this paper to the existing research lies in the following aspects: first, it places urban and rural residents in the same framework and uses different poverty measurement criteria to compare the differences in poverty reduction effects generated by Internet use. Second, to break the dichotomy method used in previous poverty studies, this paper pays more attention to the relative characteristics of relative poverty, takes the difference degree between individual living standard and average level as the index of relative poverty measurement, and generates the variable of relative poverty depth, which is an innovation of poverty measurement. Third, it reveals that the accumulation effect of capital(economic, social, and human capital)generated by Internet use is the fundamental poverty reduction mechanism and further analyzes its urban-rural heterogeneity and threshold conditions. The results suggest that, on the whole, Internet use has a more significant poverty reducing effect on rural residents than on urban residents. Thus vigorous development of Internet infrastructure in rural areas remains an important initiative for future relative poverty governance. The accumulation of human capital is the fundamental mechanism of Internet poverty reduction, warning us to pay attention to enhancing human capital. The top priorities for future poverty governance are relatively poor residents in urban areas and relatively poor “marginal” populations in rural areas. [ABSTRACT FROM AUTHOR]