The misallocation of resources and the lack of competitive mechanisms resulting from government abuse of administrative power are among the root causes of the long-term existence of zombie enterprises. Therefore, regulating government administrative monopolies and maintaining fair market competition are crucial for the governance of zombie enterprises. Using the implementation of the Fair Competition Review System as a quasi-natural experiment, and taking industrial listed companies in Shanghai and Shenzhen A-share markets from 2011 to 2022 as the research object, this paper constructs a DID model to empirically examine the governance effect of this system on zombie enterprises and its underlying mechanisms. The results indicate that the Fair Competition Review System effectively promotes the de-zombification of enterprises, primarily by reducing excessive government subsidies and bank credit, as well as enhancing market competition. Heterogeneity analysis reveals that this system particularly facilitates the de-zombification of state-owned enterprises and those in regions with higher promotion pressure on officials. Dynamic effect testing shows that this system effectively prevents normal enterprises from deteriorating into zombie enterprises. This paper not only enriches the literature on the economic consequences of the Fair Competition Review System from the perspective of zombie enterprise governance, but also provides valuable references and empirical evidence for maintaining fair market competition, optimizing resource allocation, and advancing high-quality economic development.