<p>Digital economy empowering industrial green transformation (IGT) provides a favorable guarantee for economic and environmental benefits. This study focuses on a novel perspective of the transformation tendency heterogeneity to explore the nonlinear influence and threshold effect of digital economy on IGT. By leveraging the panel data of Chinese cities from 2012 to 2021, this article employs the endogenous directional distance function model to explore the transformation direction and potential of IGT. We construct the Tobit and threshold effect models for empirical analysis, finding that the digital economy significantly accelerates IGT, with growth-oriented IGT benefiting more from the green dividend of digital economy. Digital infrastructure brings potential high-energy consumption risks, weakening the digital economy’s role in promoting environment-oriented IGT. The threshold model’s results indicate that the growth trajectory of digital economy is not entirely green. Upon surpassing a specific threshold, the driving effect of digital economy on IGT appears, showing a U-shaped trend. Notably, a J-shaped connection between the digital economy and growth-oriented IGT is present. Different regions’ comparative advantages and endogenous transformation tendencies should be considered to formulate differentiated strategies for unleashing the green potential of digital economy.</p> Graphical abstract <p></p>