Using a sample of Chinese A-share listed manufacturing firms over 2017–2025, this study empirically examines the performance effects of digital transformation, the mediating mechanism of innovation, and the enabling role of digitalization in manufacturing industrial development, with attention to sector-specific characteristics. The results show that digital transformation significantly improves firm operating performance, with innovation serving as a partial mediator. At the industrial level, firm-level digitalization generates technology spillovers and supply-chain synergy effects, contributing to overall efficiency gains and structural optimization of the manufacturing sector. By integrating both micro-level firm behavior and macro-level industrial dynamics, this paper enriches the empirical evidence on manufacturing digitalization and offers practical implications for firm upgrading, policy formulation on industrial digitalization, and high-quality development of the manufacturing industry.