Researching the relationship between urban agricultural nonpoint source pollution (UANSP) and increases in rural residents’ income levels has significant practical implications for effectively controlling UANSP and improving the quality of life of urban residents, and it is conducive to achieving a win-win situation between economic and environmental benefits. This study chooses agricultural statistical data from Shanghai from 1998 to 2019, implements the EKC and the VAR model to dynamically analyze internal interaction between them, and thoroughly examines impact effect and explanatory contribution degree of each variable. The results show the following: (1) There was an inverted “N” curve between plastic film application intensity and rural residents’ per capita disposable income; there was a linear decreasing relationship between the intensity of fertilizer and pesticide application and rural residents’ per capita disposable income. (2) Nonpoint source pollution emissions will decrease as rural residents’ income levels rise. Reduction of nonpoint source pollution can promote the short-term improvement of rural residents’ income levels, but it has a negative effect on the long-term improvement of rural residents’ income levels. (3) Fertilizer and pesticide application intensity had a low driving effect on rural residents’ income growth, whereas plastic film application intensity had a strong driving effect. Therefore, the ANSP of Shanghai should be treated from both long-term and short-term perspectives on the basis of decreasing stage. In the long term, the government should increase farmers’ sense of ownership in agricultural nonpoint source pollution control, prioritize the development of ecological circular agriculture, and gradually improve nonpoint source remote sensing monitoring and service management capabilities. In the short term, the government should reduce farmers’ nonpoint source pollution through subsidies and technical assistance. To keep costs down, the government established an administrative reward and punishment system to control ANSP at the source.
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