Scientific analysis of the environmental improvement effect in industrial transfer is conducive to promoting the synergy of industrial transfer and green development. This paper explores the environmental improvement effect of industrial transfer and analyzes the intrinsic mechanism and heterogeneity of industrial transfer policy impacts on environmental quality. The study finds that: first, overall, national-level industrial transfer policies significantly improve the environmental quality of the location; second, the mechanism analysis shows that the demonstration zone policies can promote tertiary employment, increase urban population concentration, optimize the structure of foreign investment, boost industrial structure upgrading, and improve the business environment of the region, thus improving regional environmental quality; and third, the environmental improvement effect of the demonstration zone policy is heterogeneous across regions, city types, the clarity of the receiving area, and the characteristics of the receiving industry. The environmental improvement effect of the industrial transfer policy is more obvious in the demonstration zones in central China and the Yangtze River Economic Belt, production-oriented cities, and cities with clearly defined hosting areas for the relevant industries. The environmental improvement effect is stronger for cities with high technology and service industries.