Attracting and utilizing foreign investment at the county level is an important practical requirement for promoting China's high-level opening up. In terms of theoretical research, the mechanism of the improvement of foreign investment in local urbanization construction was expounded from three aspects such as industrial structure, business environment and fiscal expenditure. In the empirical study, taking the panel data of 30 provinces (regions) from 2013 to 2021 as samples, the local urbanization index was constructed by entropy method. The empirical test results show that local urbanization can significantly improve the level of regional foreign investment. Compared with areas with high economic development level and low fiscal pressure, local urbanization has a more significant role in promoting the level of foreign investment in areas with low economic development level and high fiscal pressure.