The Chengdu-Chongqing Economic Circle is an important emerging growth pole in China’s economy. However, due to the relatively backward development and insufficient internal economic growth impetus, the competition behavior of local governments based on land transfer still exists widely, which is not conducive to the efficient allocation of land resources. Based on the perspective of government land transfer, a local government game model is constructed. Panel data from cities in the Chengdu-Chongqing Economic Circle from 2009 to 2017 are selected. Empirical research using the system GMM method indicates that government competition and misallocation of land resources in the Chengdu-Chongqing Economic Circle exhibit a significant “U”-shaped pattern of change, with the level of regional economic development being an important mechanism of this effect. The conclusions remain robust after replacing variables and excluding core cities. Furthermore, due to the repetitive nature of government competition game behavior, there is a dynamic cumulative trend of increasing misallocation of land resources.