This paper expands the theoretical analysis framework of new classicalinframarginal economics, constructs a theoretical model of Internetdriven manufacturing upgrades, reveals the internal mechanism of the Internetdriven manufacturing upgrades, and uses the dynamic spatial Dubin model to investigate the impact and spatial spillover effects of the Internet on the upgrading of the manufacturing industry. The results show that the Internet plays a significant role in promoting the upgrading of the manufacturing industry in this region and surrounding areas, with the longterm effect being greater than the shortterm effect. The mechanism test found that the Internet has driven the upgrading of the manufacturing industry primarily by deepening the division of labor and improving production efficiency, with the mediating effect of the division of labor being significantly greater than that of production efficiency. Further research found that compared with having Internet resources, improving the level of Internet technology application in a region can promote the upgrading of the manufacturing industry. Compared with the central and western regions, the eastern region has an absolute advantage in “Internet+”, which not only accelerates the upgrading of manufacturing industry in the region, but also has obvious spatial spillover effects on the upgrading of the manufacturing industry in the surrounding areas. The above research conclusions provide theoretical basis and empirical evidence for China’s implementation of the “Internet+Manufacturing” action plan.