The reform of "expanding power and strengthening zones" is an important path to stimulate the development vitality of China's development zones. The provincial development zone upgrading policy was treated as a policy shock, with panel data from 216 prefecture-level cities during 2004 to 2020 were then taken as research samples, and a difference-in-differences model was built to evaluate the impact of the policy on urban entrepreneurial activity. It is demonstrated that the upgrading provincial development zones significantly improved urban entrepreneurial activity, with stronger policy effects observed in southeast coastal regions, cities characterized by advanced industry-university-research integration, and cities with high governmental efficiency. The provincial development zone upgrading policy's entrepreneurial incentive effect is driven by three key mechanisms including positive externalities from entrepreneurship public service platform establishment, market expansion effects from enhanced domestic and international market potential, and innovation agglomeration effects from strengthened innovation incentives. Further analysis demonstrated that the provincial development zone upgrading policy not only promoted high-quality entrepreneurship in the cities where these zones are located, but also generated spatial spillover effects enhancing entrepreneurial activity enhancing entrepreneurial activity within a 50 ~ 100 km radius. These findings provide useful references for promoting a high-quality entrepreneurial ecosystem in cities with development zones as the core.