Abstract: Based on China's provincial panel data from 2003 to 2012, with the spatial weight matrix which includes both geographical distance and informatization level factors, this paper takes advantage of Spatial Error Model to test the relationship between regional innovation and industrial upgrading. The results show that the positive effect of regional innovation on the industrial upgrading is significant and robust. In addition, the spatial spillover effect is also an important factor that cannot be ignored for industrial upgrading. And on this basis, we also make corresponding policy recommendations from the aspects of improvement of independent innovation ability and informatization level.