The paper discusses the effects of the digital economy on high-quality urban development and its mechanism. Theoretically, the digital economy can empower high-quality development by boosting entrepreneurial vitality. Empirically, the paper measures the overall level of the digital economy and high-quality development of the 222 Chinese cities at and above the prefecture level during 2011–2016, depicts the entrepreneurial vitality of the cities with the microscopic data of the business registration information and makes quantitative analysis on this basis. The result shows: Digital economy has remarkably improved high-quality development and this conclusion still exists after the robustness test selecting historical data as the instrumental variables and the Broadband China pilot policy as the quasi experiment. The analysis of the mechanism of action indicates that encouraging public entrepreneurship is an important mechanism of the digital economy to release the dividend of high quality development. Finally, thanks to the threshold model and the spatial model, it is found that the positive effect of the digital economy has the characteristics of nonlinear increment and spatial spillover of the “marginal effects.” The research of the paper stimulates the reasons for high-quality development and the understanding of the effects, mechanisms and regional differences of high-quality development empowered by the digital economy.