China’s entrepreneurial activities are generally characterized by the dilemma of “entrepreneurial vitality illusion”, in which “quantity grows” while “quality slopes”. Breaking through this predicament, improving the entrepreneurial structure and enhancing the entrepreneurial quality is particularly important for realizing the high-quality development of China’s economy. As a new financial model combining Internet technology and financial business, digital finance provides new opportunities for promoting entrepreneurial quality with its strong universality, intelligence, and low cost. However, the existing literature mostly examines the relationship between digital finance and entrepreneurship from a quantitative perspective, with less focus on the quality of entrepreneurship, especially lacking in-depth research on how digital finance affects entrepreneurial activities at different levels of quality. This paper empirically examines the impact of digital finance on entrepreneurship quality using national business registration data, drawing on Rotger et al. (2012) and Global Entrepreneurship Monitor (GEM) measures to differentiate high-quality entrepreneurship from low-quality entrepreneurship in terms of entrepreneurial survivability, technology, and job creativity, and combining with China’s urban panel data from 2011 to 2022. The study finds that digital finance has a selection effect on different types of entrepreneurship, i.e., digital finance effectively stimulates high-quality entrepreneurship, inhibits low-quality entrepreneurship, and significantly improves the overall quality of entrepreneurship. Comparing the different dimensions of digital finance, the depth of its use and the degree of financial digitization are more conducive to the selection effect of high-quality entrepreneurship than the breadth of its coverage. Further research also finds that the institutional environment moderates the effect of digital finance on improving entrepreneurship quality, as evidenced by the fact that an increase in the level of financial regulation and intellectual property protection strengthens the positive effect of digital finance on entrepreneurship quality and that there are significant spatial spillovers of digital finance’s impact on different types of entrepreneurship of different qualities. Compared with the previous literature, this paper may have marginal contributions in the following three aspects: (1) For the first time, the relationship between digital finance and entrepreneurship is examined from the perspective of quality hierarchy differences, which expands the previous research on the relationship between digital finance and entrepreneurship from a new research perspective. (2) It innovatively portrays high-quality and low-quality entrepreneurship in terms of new start-ups’ survivability, technology, and employment creativity, enriching the current entrepreneurship indicator system and providing insights into the status of high-quality entrepreneurship development in China. (3) It explores the mechanism through which the institutional environment regulates the effect of digital finance on entrepreneurial quality, offering new empirical evidence for deepening the coordination between the “active government” and the “effective market”. A spatial matrix based on the development of the Internet has been designed to measure information distance, which can offer certain insights into exploring the spatial spillover effects of digital finance and the digital economy. This paper systematically examines the impact of digital finance on the quality of entrepreneurship from the perspective of quality hierarchy differences, and the results of the study deepen the knowledge and understanding of the relationship between digital finance and entrepreneurship. This study not only helps government departments to formulate more targeted policy measures to synergize the “visible hand” and “invisible hand” under the Internet revolution but also provides insights on how different types of entrepreneurial subjects can improve their financial literacy and break through the information cognition with the help of new-generation information technology. It also offers guidance on the sound and orderly development of digital finance and mitigates the influence of digital finance on entrepreneurial quality.