The high-quality development of the low-carbon economy not only affects total carbon emissions and unit energy efficiency but also is closely related to the development of foreign direct investment (FDI). The traditional urban development model often comes at the expense of the environment, and the implementation of low-carbon pilot policies is one of the important ways for China to improve the quality of foreign investment, which can effectively inhibit the entry of polluting FDI, promote the optimization and upgrading of the FDI structure, and provide strong support for the green transformation and sustainable development of Chinese cities. However, there is a lack of literature exploring its impact on FDI from the perspective of environmental regulation, especially the in-depth research on how the construction of low-carbon cities affects FDI. This paper takes the low-carbon city pilot policy as a quasi-natural experiment, adopts a multi-period difference-in-difference (DID) model, and uses panel data of 264 prefecture-level cities in China from 2005 to 2021 to examine the impact effect and mechanism of the low-carbon city pilot policy on FDI. The research results are as follows: (1) The low-carbon city pilot policy significantly inhibits FDI, and the core conclusion still holds after a series of robustness tests. (2) The mechanism analysis shows that the policy inhibits FDI inflows by improving the level of human capital. (3) Further analysis shows that differences in geographical location, city size, and resource endowment of pilot cities will lead to heterogeneous policy effects, and the impact effect on central, small-scale economy, and resource-based cities is stronger; the total sample regression results of the three batches of pilot cities on FDI have a trend of turning from negative to positive; the dual pilot policy of low-carbon city and “Broadband China” demonstration city has a stronger inhibitory effect on FDI. Compared with previous studies, this paper makes innovations in the following aspects. First, it explores the theoretical mechanism of how low-carbon city construction affects FDI, expanding the literature on the influencing factors of FDI from a new perspective. Second, considering the differences in the impact of different batches of pilots on FDI, this paper separately studies the different impacts of the three batches of pilot cities on FDI, discusses the impact trend of the three batches on FDI, and fills the gap in previous studies. Third, unlike previous studies on low-carbon city pilots, this paper explores the impact of the dual pilot policy of low-carbon cities and Broadband China demonstration cities on FDI, providing a basis for the effective implementation of the policy combination. This paper provides certain empirical evidence for deepening China’s environmental governance and improving the quality of foreign capital utilization, revealing the internal connection and interactive mechanism between environmental governance and foreign capital utilization. It helps the government departments innovate the environmental governance model, further improve the quality and efficiency of foreign capital utilization, and provide strong support for the high-quality development of the economy. In the future, China can continue to strengthen the synergistic effect of environmental governance and foreign capital utilization to promote the comprehensive and sustainable development of the economy, society, and environment.