OBJECTIVES: To quantify the impact of the COVID-19 pandemic on life expectancy in Chile categorised by rural and urban areas, and to correlate life expectancy changes with socioeconomic factors at the municipal level. DESIGN: Retrospective cross-sectional demographic analysis using aggregated national all-cause death data stratified by year, sex and municipality during the period 2010-2020. SETTING AND POPULATION: Chilean population by age, sex and municipality from 2002 to 2020. MAIN OUTCOME MEASURES: Stratified mortality rates using a Bayesian methodology. These were based on vital and demographic statistics from the national institute of statistics and department of vital statistics of ministry of health. With this, we assessed the unequal impact of the pandemic in 2020 on life expectancy across Chilean municipalities for males and females and analysed previous mortality trends since 2010. RESULTS: Life expectancy declined for both males and females in 2020 compared with 2019. Urban areas were the most affected, with males losing 1.89 years and females 1.33 years. The strength of the decline in life expectancy correlated positively with indicators of social deprivation and poverty. Also, inequality in life expectancy between municipalities increased, largely due to excess mortality among the working-age population in socially disadvantaged municipalities. CONCLUSIONS: Not only do people in poorer areas live shorter lives, they also have been substantially more affected by the COVID-19 pandemic, leading to increased population health inequalities. Quantifying the impact of the COVID-19 pandemic on life expectancy provides a more comprehensive picture of the toll.