With the increasing severity of global climate change, realizing the win-win situation between industrial development and carbon reduction through localized policy formulation has become an important goal for developing countries, which is especially vital for large economies that require decentralized systems. Therefore, this paper aims to explore the relationship between Chinese-style decentralization, industrial policy, and manufacturing carbon productivity to shed light on promoting low-carbon transformation by fine-tuning the decentralizing system. This study measures lowcarbon total factor productivity based on the SBM-GML method and sectoral manufacturing data of 30 provinces in China from 1997 to 2019, and found that fiscal decentralization has a positive effect on industrial policy in promoting manufacturing low-carbon transformation, especially in promoting the implementation effect of the local government industrial policies, but has a limited effect on industrial policies implemented by the central government alone. However, environmental decentralization has an impeding effect on the role of industrial policy in increasing carbon productivity, which is mainly reflected in the central government’s industrial policy. Furthermore, energy structure and green innovation are two important channels affecting carbon productivity. The findings of this paper provide new evidence for optimizing the decentralization system and the positioning of industrial policy between the central and local levels to promote industrial transformation and carbon emission reductions.