<p>China is grappling with the challenge of balancing economic growth and environmental governance. The National Ecotourism Demonstration Zone (NEDZ) policy, as an innovative attempt by the government to coordinate economic development and ecological protection, may serve as a viable solution to this issue. This paper utilizes the Biennial Malmquist-Luenberger Productivity Index to measure the Green Total Factor Productivity (GTFP) of 281 cities in China from 2004 to 2019. Leveraging the quasi-natural experiment of the phased establishment of NEDZs, we employ a multi-period difference-in-differences model to evaluate its impact on GTFP. Our research finds that the establishment of NEDZs has increased local GTFP by an average of 0.0159, approximately accounting for 1.52% of the mean. Specifically, the construction of NEDZs can enhance urban GTFP through industrial structure optimization, technological innovation, and strengthened environmental regulation. Heterogeneity analysis indicates that the promotional effect of NEDZ construction on GTFP is stronger in cities with larger scale, higher administrative level, non-resource-based economies, and weaker tourism foundation. Spatial spillover effect analysis demonstrates that policy not only significantly boosts local GTFP but also elevates the GTFP of surrounding cities. Further analysis reveals that local governance quality can exert a positive moderating effect on the impact of policy on GTFP. The findings of this paper provide feasible policy references for developing countries seeking to balance economic development and ecological protection.</p>