In the opening year of the 14th Five-Year Plan, China has made significant progress in upgrading its industrial structure and improving the quality of economic growth based on the goal of technological self-sufficiency and self-improvement, and more and more artificial intelligence is being used in the market. Artificial intelligence is playing an important role in the innovation and market construction of the economy. This manuscript constructs a spatial Durbin model by measuring the level of science and technology innovation and sustainable high-quality economic development of 283 prefecture-level cities in China from 2010–2019, and explores the effects and mechanisms of science and technology innovation in promoting the sustainable high-quality economic development of Chinese cities under the background of AI application. It is found that China’s science and technology innovation not only promotes the improvement of economic quality in the region, but also has positive spatial spillover, leading to the improvement of economic quality in neighboring regions. In combination with this established background, this manuscript introduces the variable of industrial structure upgrading and explores its mechanism of action in this field. Research shows that industrial structure upgrading is an important transmission path for science and technology innovation to promote sustainable and high-quality economic development. At the same time, considering the impact of the interaction between science and technology innovation and industrial structure upgrading on the sustainable and high-quality development of regional economy, this manuscript also constitutes an innovative study. Therefore, the government should continuously promote science and technology innovation and industrial structure upgrading, take advantage of China’s mega-market, make full use of the spatial spillover effect, guide the effective allocation of innovation resources, promote the orderly flow and reasonable allocation of innovation factors, and improve the institutional mechanism for promoting the market-oriented application of independent innovation results to support sustainable and high-quality economic development.