In the context of “rural revitalization” and the “dual carbon” goals, sustainable agricultural development has become an important issue and a necessary path for the development of “agriculture, rural areas, and farmers”. Based on agricultural insurance data from 11 provinces and cities along the Yangtze River Economic Belt from 2010 to 2020, the entropy method was used to measure the level of sustainable agricultural development and the impact of agricultural insurance on sustainable agricultural development and its mechanism were estimated through a fixed effects model. The results show that the level of sustainable agricultural development in various provinces and cities along the Yangtze River Economic Belt has increased significantly, with the upper reaches of the Yangtze River showing a higher increase in recent years than other provinces, indicating significant achievements in “source governance”. Benefiting from agricultural technological innovation, Shanghai has a much higher level of sustainable development than other areas downstream of the Yangtze River. Agricultural insurance can positively regulate the level of sustainable agricultural development through adjustments in production structure and factor input.