The decision-making behavior of local governments is not isolated. Their policy responses are influenced by the actions of surrounding cities, creating complex patterns of policy diffusion across multiple levels of government. The “spatial turn” in policy diffusion research has yielded a valuable spatial perspective on intergovernmental interaction, offering a clearer understanding of local government decision-making processes. This article focuses on ride-hailing regulatory policies in 277 Chinese prefecture-level cities, using spatial econometric models that consider geographic, economic, and administrative distances. The study empirically analyzes the intergovernmental interactive decision-making and spatial diffusion patterns during policy adoption of local government. It is found that a significant positive spatial dependence exits in China’s ride-hailing regulatory policies. Horizontal diffusion reveals that local governments tend to follow cities with similar economic levels and adopt alternative policy content in alignment with cities at the same administrative level. Such decision-making interaction among peer governments amplifies the diffusion effect of top-down coercive mechanisms, while vertical diffusion from different sources exhibits overlapping influences. This article re-examines traditional policy diffusion theories and assumptions from a spatial perspective, contributing to a deeper understanding of local government agenda setting and policy adoption processes.