Promoting common prosperity for farmers and rural areas is one of the key tasks in achieving common prosperity for everyone. Its main focus lies in increasing farmers’ disposable income while rationally controlling and continuously narrowing the disparity between farmers’ incomes, taking into account the inclusiveness of growth and distribution. E-commerce has driven comprehensive transformation in rural economic and social development, offering new opportunities for achieving common prosperity for farmers and rural areas. However, e-commerce has both positive and negative impacts, known as “digital dividends” and “digital divide,” respectively. Little literature has systematically analyzed the impact of e-commerce development on the common prosperity of farmers and rural areas. Based on the general form of social welfare functions, this study decomposes common prosperity for farmers and rural areas into two aspects: income growth and disparity reduction. Using panel data from 1,996 counties in China from 2014 to 2020 and China Household Income Project data, this paper employs a two-way fixed effects model and RIF regression to analyze the impact of e-commerce development on common prosperity for farmers and rural areas and its mechanisms. The research findings indicate that e-commerce development has promoted common prosperity for farmers and rural areas by increasing per capita disposable income and reducing income disparities among farmers. Mechanism analysis shows that e-commerce development mainly enhances total income by promoting farmer entrepreneurship and increasing their operational income, with limited effects on wage income and property income. Moreover, the income growth effect of e-commerce development is more significant in low-income counties, national-level poverty-stricken counties, counties far from central cities, and counties in central and western regions, reflecting a “pro-poor growth” characteristic, which contributes to narrowing income disparities among farmers. This study makes contributions in two aspects: firstly, it quantifies the achievement of common prosperity for farmers and rural areas and comprehensively analyzes the impact of e-commerce development on common prosperity, enriching the literature on e-commerce and common prosperity themes. Secondly, by adopting the general form of social welfare functions, this study decomposes the effects of e-commerce development on common prosperity for farmers and rural areas into income growth effects and income disparity reduction effects, empirically testing these effects to enhance understanding of the transmission mechanisms and realization pathways of e-commerce in aiding common prosperity for farmers and rural areas. This research explains the income growth effects and disparity reduction effects of e-commerce development for rural residents, providing insights for the government in promoting digital rural strategies, rural revitalization strategies, and achieving common prosperity for farmers and rural areas.