Abstract: Innovation plays a more and more prominent role in the society. It is an important way for the sustainable development according to enhancing innovation capability. Comparing with the village, characters of cities are propitious to the innovation. Urbanization creates favorable conditions for innovation diffusion. The correlation analysis shows that urbanization is highly positive correlated with technology innovation. Causality tests reveal the Granger causality between urbanization and technology innovation. Innovation capability is accordant with the city size. Empirical analysis indicates that urbanization facilitates technology innovation. City size, openness and regional differences also affect the output of innovation. In the end, recommendations for promoting urbanization and fostering innovation advantage are discussed.