Using panel data from 239 prefecture-level cities in China from 2015 to 2018, this study employs a two-way fixed effects model to analyze the impact of digital economic development on the upgrading of the industrial structure. The research findings are as follows: (1) The development of the digital economy significantly promotes the advancement of industrial structure but does not significantly promote its rationalization. (2) Digital economic development contributes to optimizing and upgrading regional employment structures but inhibits consumer upgrading. (3) On one hand, the digital economy promotes the advancement of industrial structure through the upgrading of employment structure, but the consumption downgrading caused by the digital economy to some extent masks the direct impact of the digital economy on the advancement of the industrial structure; on the other hand, the upgrading of employment structure caused by digital economy inhibits the improvement of the rationalization level of industrial structure, while the downgrading of consumption promotes the improvement of the rationalization level of industrial structure. (4) The heterogeneous analysis results show that, at the level of advanced industrial structure, the digital economy significantly promotes the development of the central and western regions as well as cities beyond the third-tier digital areas. However, it has a significant hindering effect on first-tier and second-tier cities. At the level of industrial structure rationalization, the digital economy has a significantly positive impact on cities in the eastern region but a significantly negative impact on cities in the western region.