Based on panel data of industrialization and urbanization in Three Gorges Reservoir area during 2003—2014, by using panel vector autoregression model to conduct empirical analysis, this paper quantifies the dynamic interaction effect between industrialization and urbanization, and compares the difference in the dynamic interaction between important area and general area of the Reservoir area.The research results show that the promotion effect of the industrialization of Three Gorges Reservoir area on the urbanization development is not obvious, that urbanization development depends on previous growth level, that the impact of the urbanization on industrialization development in the Reservoir area is significant, has crowding out effect on the industrialization development in shorttime but has spillover effect on the industrialization in longterm, and that the stronger the government promotion effect is, the weaker the spontaneous market promotion effect on industrialization and urbanization is.