Green finance has become a critical financial mechanism for advancing urban low-carbon transformation, yet its environmental effects remain theoretically contested between the “green promotion” hypothesis and the “green paradox.” Existing literature largely concentrates on industrial and energy-sector transitions, overlooking the urban dimension. Drawing on panel data for 261 Chinese cities from 2006 to 2023, this study employs a panel threshold model with two-way fixed effects to examine the nonlinear relationship between green finance and urban low-carbon transformation, with particular attention to the roles of industrial structure upgrading and government attention. The results reveal that: (1) green finance, industrial structure upgrading, and government attention all significantly facilitate urban low-carbon transformation; (2) both industrial structure upgrading and government attention exert negative moderating effects on the contribution of green finance to urban low-carbon transformation; and (3) these moderating effects display pronounced heterogeneity across cities. The findings extend the theoretical understanding of the environmental effects of green finance within the urban context and uncover the multidimensional drivers of urban low-carbon transition. In practice, this study provides evidence-based insights for improving China’s green financial system, refining industrial upgrading pathways, and enhancing government governance mechanisms, thereby supporting high-quality urban development amid global green transition efforts.