The cities in urban system meet the rank-sized rule. Innovation diffusion in urban system has several modes, such as hierarchical diffusion, contagious diffusion, and so on. The correlative analysis indicates that there is a clear correlation mechanism between innovation diffusion and urban system. Empirical analysis shows that both the innovation capacity and city size have hierarchical characters and are highly correlative in the Yangtze River Delta. The spatial diffusion order of innovation is consistent with the urban hierarchical structure. The spatial diffusion in urban system mainly belongs to hierarchical diffusion.