New urbanization is the key to promoting economic growth and an important way to achieve the Chinese path to modernization. With the development of the digital economy, the financial sector has also set off a wave of digital innovation, but there has been no research on integrating the fiscal governance system with the development of the digital economy, and exploring the relationship between fiscal digital transformation and new urbanization. Based on the panel data of 30 provinces (autonomous regions and municipalities) in China from 2016 to 2022, this paper empirically analyzes the impact and mechanism of fiscal digital transformation on new urbanization. The study finds that fiscal digital transformation has a positive role in promoting new urbanization, and the results still hold after a series of robustness tests and endogenous processing. Mechanism testing finds that optimizing the structure of public expenditure and improving fiscal transparency are two important paths for fiscal digital transformation to promote the development of new urbanization. Heterogeneity analysis shows that in regions with higher economic growth targets, stronger fiscal absorptive capacity, and higher levels of fiscal decentralization, the promotion effect of fiscal digital transformation on new urbanization is more significant. Threshold regression results show that the impact of fiscal digital transformation on new urbanization has a single threshold effect based on the structure of public expenditure and fiscal transparency. The higher the degree of public expenditure structure optimization or fiscal transparency, the stronger the promotion effect of fiscal digital transformation on new urbanization. This paper not only provides a new perspective and theoretical basis for the high-quality development of new urbanization based on fiscal digital transformation, but also provides important practical guidance and policy references for local governments to promote fiscal digital transformation, optimize the financial governance system, and accelerate the process of new urbanization.