In order to respond to climate change and fulfill international carbon emission reduction commitments, China has carried out a series of low-carbon city pilot projects since 2010. No literature has yet explored the question of whether the pilot low-carbon city policy can enhance the level of sustainable urban development. To this end, based on the panel data of 289 prefectural-level cities in China, this paper uses the low-carbon city pilot policy as a quasi-natural experiment to test the impact on the level of sustainable development. Besides, mechanisms of the process are analyzed from the perspective of multiple subjects and the spatial Durbin model is used to verify the spillover effect of policy implementation. The overall regression results show that the low-carbon city pilot policy could significantly promote the sustainable development level of the city. Further analysis reveals that the green technology innovation and the green living standards play an important role between the low-carbon city pilot policy and the level of urban sustainable development. The strength of government environmental regulation also has a significant positive moderating during this process. In addition, there are positive spatial spillover effects and urban heterogeneity of low-carbon pilot policies. These conclusions provide suggestions for promoting the construction of low-carbon cities and enhancing the level of sustainable urban development.