Using the actual land market transaction data of China land market website and the panel data of 277 prefecture level cities in China, this study uses the the spatial lag of X model (SLX) based on 2SLS method to explore the impact mechanism of land resource allocation on the quality of urban economic development. The results show that the biased allocation of land resources in the industrial field leads to a serious underestimation of the price of industrial land, which in turn leads to a reverse misallocation problem that the due income of industrial land is greater than the actual price. Although the biased allocation of land resources can improve the sharing level of economic development achievements to a certain extent, it has significant negative impacts on the quality of economic development of the local and surrounding cities by hindering the development of economic momentum conversion, reducing development efficiency, restraining industrial structure upgrading, and increasing the pressure on energy conservation and emission reduction. Further studies find that, apart from the misallocation of land resources in small cities which has no obvious impact on themselves and neighboring cities, the misallocation of land resources between large and medium-sized cities has an inhibitory effect on the quality of economic development of their own and surrounding cities of the same level, as well as the misallocation of land resources between medium-sized and surrounding small cities. However, the spatial spillover effect of land resource misallocation between large cities and medium-sized cities has significantly improved the quality of urban economic development mutually. The conclusion of this paper has important practical significance for deeply grasping the mechanism of land resource allocation affecting the quality of urban economic development, further promoting the market-oriented reform of urban construction land and realizing high-quality economic development.