Based on the simple data of 261 cities from 2010 to 2020, the impact and mechanism of the policy of industrial transformation and upgrading demonstration zones on urban air quality were studied using the difference in differences method. It was found that the policy of industrial transformation and upgrading demonstration zones significantly improved the air quality of the demonstration zone cities: during the sample period, the concentration of PM_2.5 in the demonstration zone cities was reduced by an average of 3.238μg/m³, which accounted for approximately 7.711% of the average PM_2.5 concentration in the demonstration zone cities before the policy was implemented. This conclusion remained valid after robustness tests such as parallel trend testing, placebo testing, and the PSM-DID method. This conclusion remained valid after robustness tests such as parallel trend testing, placebo testing, and the PSM-DID method. Mechanism analysis revealed that the policy of demonstration zones mainly improved urban air quality by promoting the optimization of urban industrial structure and strengthening environmental regulations. Heterogeneity analysis found that, compared with resource-based cities, eastern and northern regions, the improvement effect of demonstration zone policies on urban air quality was more significant in old industrial cities, composite cities, central and western regions, and southern regions. The moderation effect analysis revealed that Chinese-style Decentralization had a moderating effect between the construction of demonstration zones and the improvement of air quality: compared with cluster-style demonstration zones and those that only received a qualified evaluation in the annual assessment, single-style demonstration zones and those that received excellent and good evaluations might have a more significant effect on air quality improvement.