This study employs a sample of 283 Chinese cities in 2005−2021 to investigate how digital finance (DIF) promotes low-carbon development from an urban agglomeration (UA) perspective. The moderated mediation and multiperiod difference-in-differences models are utilized to explore DIF’s potential carbon emission reduction paths and the moderation mechanism of UA policies. This research yields some valuable and robust conclusions. First, DIF and UA policies promote carbon emission reduction with noticeable regional variations. Second, green technology innovation (GTI) and industrial structure upgrading (ISU) play a crucial negative mediating role in the impact of DIF on carbon intensity. Third, UA policies have further enhanced the carbon emission reduction capabilities of DIF, GTI, and ISU. Fourth, UA policies enhance their role when DIF positively fosters GTI but does not exhibit a moderating effect when DIF positively facilitates ISU.