The　rapid　expansion　and　implementation　of　digital　technologies　are　profoundly　changing　our　lifestyles,　production　methods,　and　modes　of　exchange.　However,　whether　or　not　such　change　can　help　promote　the　sustainability　of　urban　socio-environmental　systems　has　not　been　fully　investigated.　In　this　paper,　we　propose　a　comprehensive　framework　that　utilizes　the　spatial　Durbin　model　to　investigate　whether　and　how　the　digital　economy　contributes　to　low-carbon　urban　development,　using　the　panel　data　of　276　Chinese　cities　from　2011　to　2018.　This　framework　systematically　identifies　triple　dimensions　of　low-carbon　transition　taking　place　throughout　the　whole　value　chain　system,　i.e.　green　innovation,　production　reshaping,　and　consumption　upgrading.　The　finding　reveals　that　the　digital　economy　in　a　city　exerts　a　significant　mitigating　effect　on　carbon　emissions　in　both　local　and　neighboring　cities.　It　is　also　observed　that　digital　economy　activities　play　a　significant　role　in　alleviating　urban　carbon　emissions　due　to　their　capacity　to　stimulate　green　innovation　and　promote　sustainable　patterns　of　production　and　consumption.　The　robustness　of　these　findings　is　assessed　through　the　consideration　of　endogeneity　and　substitution　of　the　explained　and　explanatory　variables.　This　paper　contributes　to　a　systematic　understanding　of　the　linkage　between　the　revolution　of　digitalization　within　economic　systems　and　the　transition　towards　sustainability　within　environmental　systems.　It　also　provides　valuable　insights　to　policymakers　on　strategies　to　promote　and　accelerate　low-carbon　development.