Abstract: It is essential to explore how the path of ecological co-prosperity can promote urban-rural co-prosperity. The construction of national forest cities is a policy initiative aimed at advancing urban-rural integration and realizing rural revitalization, aligning with the shared aspirations of both urban and rural populations. Adopting an institutional perspective is of significant practical value in assessing the policy impacts of national forest city development on urban-rural integration. Based on dynamic panel data from 269 cities, this study systematically examined the impacts and mechanisms of national forest city creation on urban-rural integration. The analysis employed a combination of methods, including difference-in-differences (DID), propensity score matching difference-in-differences (PSM-DID), panel quartile regression, mediation effect modeling, and threshold effect modeling. The results demonstrated that the construction of national forest cities effectively promoted urban-rural integration. This effect remained robust after addressing potential endogeneity and conducting various robustness checks. Mechanism analysis revealed that forest city creation promoted integration indirectly by improving air pollution control and incentivizing green technological innovation. Heterogeneity analysis indicated that the positive effects of forest city development increased marginally as the level of urban-rural integration improves. Furthermore, the impact is more pronounced in eastern cities, non-resource-dependent cities, and key cities for environmental protection. Threshold effect analysis suggested that the impact of national forest city creation on urban-rural integration exhibited nonlinear and incremental characteristics. Specifically, when environmental regulation intensity and industrial structure transformation exceed certain thresholds, the positive effect of forest city development on integration becomes significantly stronger. Accordingly, it is recommended to develop a localized model of “urban-rural synergistic development” for national forest city construction; to implement enhanced measures to reduce urban-rural air pollution; and to promote urban-rural integration by leveraging green technology as a new engine of growth.