Since the 18th National Congress of the Communist Party of China, China’s opening-up strategy has gradually deepened from commodity and factor flow opening to institutional openness. The report of the 20th National Congress of the Communist Party of China clearly stated “urging efforts to steadily advance institutional opening-up with respect to rules, regulations, management, and standards”. The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China further stressed the need to “steadily expand the institutional opening-up” and “adhere to opening-up to promote reform and development”. High-quality development is the primary task of building a modern socialist country in an all-round way. Given that high-quality development has become the primary task of building a modern socialist country in an all-round way, the service industry, as a crucial pillar of the national economy, urgently needs to improve its development quality. However, there remains a lack of systematic research in the existing literature on the causal effects, mechanisms, and heterogeneous characteristics of institutional openness on the high-quality development of the service industry. This study constructs an evaluation system for high-quality development of the service industry, covering four dimensions: scale expansion, structural optimization, efficiency improvement, and employment growth, based on panel data from 186 prefecture-level and above cities in the China Economic Net database from 2010 to 2024. The entropy weight method is employed to measure the high-quality development index of the service industry at the city level. By treating the phased implementation of the Comprehensive Pilot Program for expanding service industry opening-up as a quasi-natural experiment, this study employs a multi-period difference-in-differences approach to identify the causal effects of institutional openness on the high-quality development of the service industry. The findings reveal that the pilot policy significantly promotes the high-quality development of the service industry, and the results remain robust under various robustness tests. Mechanism analysis indicates that the policy operates through multiple pathways, including optimizing the business environment, attracting foreign investment, stimulating entrepreneurial vitality, and enhancing innovation levels. Heterogeneity analysis further shows that the policy effects are more pronounced in cities that have weaker foundations for openness, lack geographical advantages such as ports, possess higher digital technology levels, or are located in southern China, reflecting the triple effects of “institutional compensation”, “digital empowerment”, and “institutional reinforcement”. Compared with existing studies, the marginal contributions of this paper are threefold: First, it constructs a multidimensional indicator system at the city level to measure the high-quality development of the service industry and provides empirical support for “promoting development through opening-up” from the perspective of institutional openness. Second, it systematically explains and verifies the mechanisms of the policy, offering a theoretical basis for the precise design of the opening-up measures for the service industry. Third, it reveals the heterogeneity of policy effects across dimensions such as openness foundations, digitalization levels, geographical conditions, and regional characteristics, so as to provide scientific references for implementing differentiated and targeted opening-up strategies. This study unveils the intrinsic logic of how pilot programs drive the high-quality development of the service industry. It helps practitioners get rid of the single and fragmented policy thinking and turn to the reform strategy focusing on system integration. A coordinated approach encompassing business environment optimization, foreign investment guidance, entrepreneurial support, and innovation-driven development is essential to fully harness the benefits of institutional opening-up and effectively steer the service industry toward high-quality development. Simultaneously, implementing a differentiated opening-up strategy characterized by “categorized guidance and precise policy implementation” will contribute to achieving greater success in institutional openness.