Accelerating the green and low-carbon transformation of agriculture is imperative for China to build a strong agricultural country and achieve the strategic goals of carbon peaking and carbon neutrality. How to improve the agricultural green total factor productivity (AGTFP) is the key issue facing the transformation. The agricultural machinery purchase subsidy policy implemented since 2004 has greatly promoted the development of agricultural mechanization in China, which in turn has contributed to the technological progress of agricultural production and the improvement of agricultural productivity. However, in addition to economic effects, the implementation of this subsidy policy also has an impact on the ecological environment. Existing literature lacks consideration of environmental effects when examining the impact of agricultural machinery purchase subsidies on AGTFP. Based on the panel data of 31 provinces in China from 2008 to 2021, this paper uses the EBM-GML index model to measure the AGTFP of each province, and empirically examines the impact of agricultural machinery purchase subsidy on AGTFP through the panel fixed effect model, and makes a comparative analysis with the traditional agricultural total factor productivity without considering environmental factors. It is found that agricultural machinery purchase subsidy has significantly improved AGTFP. After robustness tests such as replacing the explained variable, replacing the explanatory variable, replacing samples, endogenous treatment, and propensity score matching, the conclusions are still robust. The agricultural machinery purchase subsidy mainly promotes the growth of AGTFP through the channel of technological progress, with the channel of technical efficiency being less significant; if environmental factors are not considered, the promotion effect of agricultural machinery purchase subsidy on agricultural technology progress and AGTFP will be overestimated. The results of the heterogeneous analysis show that the promotion effect of agricultural machinery purchase subsidy on AGTFP will be more obvious in areas with higher levels of human capital, in plain areas, and in regions with higher environmental regulation levels. Compared with the previous research, this paper expands on the following three aspects. Firstly, different from existing literature that predominantly examines the implementation effects of agricultural machinery purchase subsidies from a single economic or environmental perspective, this study expands the research scope by focusing on the agricultural green total factor productivity index, which considers both economic and environmental effects, thereby broadening the study of the effectiveness of agricultural machinery subsidy policies. Secondly, this paper compares and analyzes the impact of agricultural machinery purchase subsidies on agricultural technology progress and agricultural technology efficiency in different situations (with and without consideration of environmental factors), and investigates the green bias of agricultural machinery purchase subsidies. Thirdly, based on the heterogeneity of rural human capital levels, terrain conditions, and environmental regulation levels, the paper further explores the external supportive environment for promoting the improvement of AGTFP through agricultural machinery subsidies. This paper reveals the underlying logic of how agricultural machinery subsidies affect AGTFP. It proposes strengthening support for complementary policies such as the construction of agricultural mechanization infrastructure, agricultural machinery technology training services, and land transfer. Additionally, it suggests integrating environmental effects into the policy evaluation of agricultural machinery subsidies. By doing so, government departments can maximize the supportive role of agricultural machinery purchase subsidies in promoting agricultural green development under the goal of the green and low-carbon transformation of agriculture.