Green technological innovation and a favorable industrial development environment are key drivers of sustainable industrial growth. However, structural imbalances in China’s traditional financial system constrain innovation and hinder the development of green industrial ecosystems. In this context, digital finance has emerged as an important mechanism to alleviate financing constraints and support green transformation. Using panel data from 284 Chinese prefecture-level and above cities over the period 2011–2022, this study constructs a composite index of Industrial Green Transformation (GT) based on the entropy weight method. A comprehensive empirical framework integrating fixed-effects, mediation analysis, and spatial Durbin models is employed to examine the direct effects, transmission mechanisms, and spatial spillovers of digital finance. The results show that digital finance significantly promotes GT, and this finding remains robust after a series of tests, including sample adjustments, variable substitutions, and instrumental variable estimations. Mechanism analysis indicates that green technological innovation and industrial ecosystem development, proxied by government support, talent supply, and economic agglomeration, serve as the primary transmission channels. Spatial econometric analysis further reveals significant positive spillover effects and spatial clustering characteristics. Moreover, the effect of digital finance is more pronounced in cities east of the Huhuanyong Line, non-resource-based cities, and regions with higher human capital endowments. This study extends the literature by incorporating industrial ecosystem development into the analytical framework and providing new evidence on the spatially embedded nature of the mechanisms of digital finance. The findings offer important policy implications for strengthening digital infrastructure, promoting regional fintech collaborative development, and advancing sustainable industrial transformation.