Employing the revision of the Catalogue for the Guidance of Foreign Investment Industries as a quasi-natural experiment, this paper comprehensively adopts difference-in-differences, continuous difference-in-differences and difference-in-differences-in-differences models to investigate the impact of foreign investment deregulation on industrial innovation efficiency. The results show that foreign investment deregulation significantly improves industrial innovation efficiency in China. The policy has progressively diminishing promotional effects across sectors-strongest in technology-intensive industries, moderate in labor-intensive industries, and weakest in capital-intensive industries; Investment from Hong Kong, Macau, and Taiwan significantly outperforms other sources of foreign investment in boosting industrial innovation efficiency. Foreign investment deregulation primarily enhances industrial innovation efficiency by increasing funding for technology absorption and adaptation.