Abstract Regional inequalities in mortality are rising across the globe. The case of German reunification offers a unique opportunity to explore how such inequalities can be reduced, or even eliminated: following reunification, a long-standing life expectancy gap between East and West Germany was closed for women and markedly reduced for men in a period of less than 15 years. Drawing from theory on health inequalities, we investigate the contribution of material, behavioural and psychosocial factors likely related to the narrowing of the life expectancy gap between East and West Germany following reunification. We used regional data from official national statistics covering the period 1994-2020 for 15 regions in East and West Germany. Using fixed-effects models with an interaction term for regions in the East, we investigated whether within-region changes in key hypothesised factors (social security expenditure, healthcare improvements, changes in alcohol consumption, and life satisfaction), have had differential impacts on life expectancy at birth and at 65 years. We find that increases in social security benefits in the East following reunification has been the most important factor for lowering inequalities between the two parts of Germany: for every standard deviation increase in social security benefits, life expectancy at birth increased by an additional 0.20 [0.07,0.33] years for males and by 0.15 [-0.01,0.31] years for females in East relative to West Germany. We find the protective effect of social security benefits also for women at 65 years (additional 0.14 years [0.006,0.268]) but not for men. Overall, our findings suggest that increasing social security expenditure could be an effective policy-based tool for reducing health disparities across regions with different levels of economic development. This provides additional support for the relevance of the materialist hypothesis and the political economy of root causes of health inequalities. Key messages • Our findings suggest that increasing social security expenditure could be an effective policy-based tool for reducing regional health disparities. • We find support for the materialist and political economy approaches to explaining health inequalities.