Energy utilization efficiency (EUE) has always been an important concern during urban sustainable development. The new type urbanization comprehensive pilot policy (NTU policy) is a major initiative to promote urbanization in China, with one of the main objectives of this policy being to enhance the capacity of cities to develop sustainably. This study examines the impact of the NTU policy on EUE using the difference-in-differences model. The study finds that the NTU policy remarkably improves the EUE. This finding still holds up following a number of robustness tests. Mechanism analysis indicates that NTU policy improves EUE by promoting green technology innovation and industrial structure upgrading. Heterogeneity analysis indicates that NTU policy is significantly more useful in improving EUE when implemented in the eastern regions, high administrative level regions, high population density regions, old industrial regions, and high EUE lever regions. This study provides a reference for energy efficiency improvement in China and empirical evidence for sustainable paths of urbanization in other countries.