The Study of the influence of FDI on environmental quality under the backdrop of openness concerns the sustainability of Chinese green development. This paper introduces endogenous environmental regulation into the theoretical model established by Copeland and Taylor. Then it decomposes and studies the heterogeneous effects of FDI on local environmental quality. Theoretical analysis shows as follows:firstly, the effects of FDI on local environmental quality can be decomposed into scale, structure, technology and income effects; secondly, the technology and income effects of FDI on the improvement of environmental quality are positive, and the scale & structure effects are negative; and there is theoretically a threshold value of FDI in terms of the improvement of environmental quality. Furthermore, this paper takes sulfur dioxide concentration rather than pollutant discharge commonly used in previous literature as the indicator of urban environmental quality and makes an empirical test at prefecture level. It arrives at the following empirical results:firstly, at present, as a whole, FDI improves environmental quality in China through scale, structure, technology and income effects; secondly, there is a threshold value in terms of the effect of FDI on environmental improvement, namely when the proportion of FDI is more than 0.12, FDI increase will lead to the deterioration of environmental quality. This paper provides enlightenment for how to exert the role of FDI in environmental improvement and formulate more flexible policies in purpose of attracting investment and differentiated environmental policies.