Cities are major contributors to climate change, while climate change poses significant threats to urban development. In seeking symbiosis, urban digitalization, as exemplified by smart cities, may offer viable solutions for achieving sustainable development. Analyzing a sample of 3,983 Chinese A-share listed companies from 2003 to 2021 using the time-varying difference-in-difference (DID) technique, we find a positive effect of smart city construction on firm green innovation. The event study approach verifies the parallel trend assumption of DID and shows that the smart city policy has a long-term effect on green invention patents and a short-term effect on green utility patents; an immediate impact on independently filed green patents and a delayed impact on jointly filed green patents. Further analysis from the perspective of innovation ecosystems reveals that green innovation benefits from the synergistic influence of smart city policies and relationships with universities or governments, particularly when the university has a substantial and direct stake in the firm, or the firm is state-owned. These results remain robust across various tests, including re-estimation using sub-samples, substitution of proxy variables for green innovation, inclusion of additional control variables, examination of other policy influences, placebo tests, re-estimation after propensity score matching or entropy balancing method, and instrumental variable estimation. Our findings offer actionable insights for policymakers and practitioners, highlighting how digitalization can transform the conflict between urbanization and climate change into a harmonious and mutually beneficial symbiosis. This transformation can be effectively facilitated through collaborative efforts among governments, companies, and academic institutions, working together to develop and implement innovative solutions.