<p>Improving land use efficiency (LUE) is an effective mean to address the imbalance between land resource supply and demand, while also reducing carbon emissions (CE) simultaneously. However, due to neglect of the differentiation of distinct land categories, tailored policies targeting the efficiency-carbon emissions dynamics of specific land categories have not been developed. Drawing on panel data spanning the years 2006 to 2019 from 284 prefecture-level cities in China, by employing a data envelopment analysis (DEA) approach, this paper measures the utilization efficiency of three categories of land with production capabilities—agricultural, industrial, and commercial land—as well as ecological land. Employing the spatial Durbin model (SDM), this paper empirically examines the influence of LUE on CE and their spatial spillover effects by analysing spatial heterogeneity across regions. The main research findings include the following: (1) Significant autocorrelation exists in CE in Chinese cities. China’s agricultural LUE showed a declining trend, while industrial and commercial LUE exhibited a significant upwards trend, reflecting the overall development characteristics of the primary, secondary, and tertiary sectors during China’s rapid urbanization phase. (2) The ecological LUE exhibits a notable positive spatial spillover effect on the CE of adjacent cities. Improving the utilization efficiency of agricultural, industrial, and ecological land contributes to a reduction in CE. (3) Regional heterogeneity analysis reveals that agricultural LUE demonstrates a positive spatial spillover effect on reducing CE in neighbouring areas within the central and western regions. In the eastern, central, and western regions, the ecological LUE exhibits a positive spatial spillover effect, contributing to the reduction of CE in neighbouring areas. The results provide references for further exploring the carbon reduction potential of differentiated land use systems.</p>