Common prosperity is a critical strategic goal for China, and improving factor income distribution is a pivotal pathway to achieving this goal. As a broad and profound systemic transformation, low-carbon transition encompasses multiple dimensions, including the economy, society, industry, and technology, which will inevitably exert a significant impact on the pattern of factor income distribution. Against this backdrop, it is essential to explore whether China’s low-carbon transition will help improve the pattern of factor income distribution? If so, what is the underlying mechanism? Are there notable differences in this impact across various enterprises, industries, and sectors? To address these questions, this paper first constructs a two-sector general equilibrium model to theoretically analyze the impact of low-carbon transition on the pattern of factor income distribution and its mechanism. Furthermore, taking the “Implementation Plan for Energy Conservation and Low-carbon Actions of Ten Thousand Enterprises” as a quasi-natural experiment, it employs the continuous DID method to empirically validate the theoretical findings. The study reveals that low-carbon transition primarily optimizes the pattern of factor income distribution by altering technological progress bias. On the one hand, low-carbon transition enhances the share of labor income through labor-biased technological progress, thereby alleviating the imbalance between labor and capital factor income. On the other hand, it reduces the skill premium level via low-skill-biased technological progress, thus mitigating income inequality among workers. Moreover, the impact of low-carbon transition on the skill premium level exhibits heterogeneity based on enterprise characteristics, which to a greater extent reduces the skill premium level in high-skill-intensive enterprises, enterprises with lower energy conservation targets, and state-owned enterprises. The study recommends that the government should continue to promote low-carbon transition, strengthen top-level design and policy guidance, and reasonably steer the bias of technological progress. It also suggests improving the marginal efficiency of low- and medium-skilled labor, reinforcing vocational skills education and lifelong learning systems, and implementing targeted policies tailored to enterprise characteristics to foster a conducive development environment for integrating the goals of low-carbon transition and common prosperity. This paper provides valuable insights into the coordinated achievement of Chinese-style modernization goals, namely “harmonious coexistence between man and nature” and “common prosperity for all”.