Sustainable innovation in food packaging has become a pressing concern for environmental and business sustainability, due to the ongoing growth of the global food industry. Nevertheless, research on sustainable innovation in food packaging is scarce in China, which holds a significant market share. Hence, this study seeks to investigate the driving factors and mechanisms of sustainable innovation in agricultural food packaging in China, addressing a critical research gap. Through the examination of survey data obtained from 482 Chinese companies specializing in agricultural product packaging, the study has uncovered a number of significant findings. Initially, the pressure from regulatory, market demand, and competition not only directly boosts sustainable innovation in food packaging but also spurs further development through the mediating role of knowledge acquisition. Additionally, these pressures have a beneficial influence on a firm’s acquisition of knowledge, which in turn supports the attainment of sustainable innovation in food packaging. The research presented in this paper offers both significant theoretical knowledge and practical evidence in the realm of sustainable innovation within the food packaging industry. It enhances our comprehension of how regulation, market requirements, and competitive factors impact corporate innovation practices, contributing fresh empirical backing to enhance existing theoretical frameworks. From a practical perspective, this study provides practical advice for Chinese companies in the agricultural food packaging sector, aiding in the improvement of their sustainable competitive edge. Additionally, it serves as a cornerstone for the industry’s green growth, promoting the creation of a more secure, healthy, and sustainable future society.