<p>To support the carbon neutrality goal, China introduced a green fiscal policy in 2011, with a primary focus on energy conservation and emission reduction. However, there is a notable gap in empirical research regarding the incentive effects of this policy on corporate green innovation. Using a multi-period difference-in-difference model, this study examines whether the green fiscal policy drives green innovation in heavily polluting enterprises. The results indicate that: (1) the green fiscal policy sustainably enhances the green innovation capacity of heavily polluting enterprises in both quantity and quality. The results remain robust after a series of tests. (2) Mechanism analysis shows that the main paths for the green fiscal policy to promote corporate green innovation are through the anti-driving effect of higher external media pressure and internal environmental attention, and the resource compensation effect by increasing corporate environmental investment. (3) The green innovation-driven effect of the green fiscal policy is more significant among state-owned enterprises, enterprises with higher internal control quality and located in regions with stricter environmental regulations. Our findings highlight the critical role of green fiscal policies in driving corporate green transformation and sustainable economic development in developing countries.</p>