Abstract: From the perspective of labor market demand and supply, this paper puts forward the theoretical mechanism that Digital Finance affects labor misallocation through labor pool effect and human capital effect. Furthermore, by matching the Digital Financial Inclusion Index compiled by Peking University with the data of 279 prefecture level cities in China from 2011 to 2016, this paper empirically tests the impact of Digital Finance on labor misallocation by using panel regression model with instrumental variables. The results show that: Digital Finance can significantly improve labor misallocation, and the three sub indicators of coverage breadth, usage depth and digitization level also significantly improve labor misallocation. Heterogeneity analysis shows that the improvement effect of Digital Finance on labor misallocation is stronger in cities with lower urbanization level and lower financial development level, and more significant in central and western regions, which also confirms the inclusive function of digital finance.