<p>While corporate green bonds have become increasingly prevalent around the world, little is known about the motivation of firms to utilize this new incentive financial instrument. On the basis of signaling theory, this paper employs a novel identification method to answer this question from the perspective of corporate environmental disclosure in China, where the green bond market has rapidly expanded due to a battery of encouraging government policies in recent years. We document that corporate environmental disclosure quality increases by 14.75% following green bond issuance, which is consistent with the signaling hypothesis. The positive response is driven by attracting more green investors and exhibiting better environmental performance. Furthermore, we find that the positive environmental disclosure impact of green bond issuance is more pronounced when it is certified by an independent third party, committed to supporting front-of-pipe treatment projects and issued for the first time, and for firms without environmental violations. Collectively, our findings indicate that government regulators may leverage the green bond market as an effective mechanism to accelerate corporate green transition, whereas stakeholders should consider green bond issuance as a salient benchmark for evaluating firms’ environmental governance performance.</p>