Under the land-based development mode, local governments dominate land allocation and adopt the strategy of “low price for industrial land, high price for commercial and residential land” in land transfer, which has achieved the goal of industrial structure upgrading and economic growth in China. However, during China’s economic transition, the land supply strategy that once promoted the upgrading of industrial structure may no longer meet the development requirements of the new era. Through the theoretical analysis of governments’ land supply logic and the effects of differential pricing strategy in land supply on the upgrading of industrial structure at different economic development levels, this study came up with hypotheses and then based on the threshold regression model made an empirical test by using the data of land supply in 277 cities of China from 2011 to 2016. The results show that the influence of land price difference on the upgrading of industrial structure is non-linear due to different economic development levels. The effect of the differential pricing strategy in land supply on the upgrading of industrial structure changes from positive to negative with the improvement of economic development level, and the mismatch of land supply structure caused by inclined supply of commercial and residential land significantly restrains the upgrading of industrial structure, whereas enhancing the marketization of land transfer and lowering the dependence on land finance will promote it. Therefore it is suggested that local governments should fully consider the socioeconomic environment in which they operate when formulating land supply strategies, and identify the limitations of their intervention in the economy, pay attention to cultivating more effective markets, improve the degree of land marketization, and avoid excessive reliance on land finance when participating in land market activities.