Consumer prices rose 2.6 percent, down from July's 2.7 percent, government data showed Monday. Food prices rose 4.7 percent, down from the previous month's 5 percent.
Slower price rises and improved economic activity could allow Chinese leaders to shift attention from propping up weak growth to work on longer-term reforms to make the economy more efficient and productive.
Communist leaders are trying to nurture more self-sustaining growth driven by domestic consumption instead of trade and investment. They have backtracked in some areas to perk up growth with more spending on railway construction and other limited measures but have resisted pressure for a more ambitious stimulus.
Economic growth declined to a two-decade low of 7.5 percent in the second quarter but trade, factory output, auto sales and other indicators suggest the slowdown is leveling out.
"A number of data points suggest that economic activity is picking up," said Alaistair Chan of Moody's Analytics in a report. "These factors suggest that the government will not loosen monetary policy further."
Export growth accelerated to 7.2 percent in August from July's 5.1 percent.
Also in August, producer prices, or prices of goods as they leave the factory, that have declined steadily for more than a year fell less sharply.
Producer prices declined 1.6 percent compared with July's 2.5 percent fall.
"The decline in producer prices is easing as commodity prices and the wider economy recover," said Matthew Circosta of Moody's Analytics. "A revival in production and fixed investment is placing upward pressure on mining, raw materials and manufactured goods prices."