To reduce greenhouse gas emissions and achieve high-quality economic development, China has proposed another development pattern called dual circulation development (CIR), along with the goals of “carbon neutrality and carbon peaking”. Based on the data of prefecture-level cities and above from 2006 to 2021, the fixed-effects model, 2SLS model, mediation model, threshold model, and spatial Durbin model are used to discuss the role of CIR in affecting CO2 emissions. Results demonstrate that (1) the overall CO2 emissions exhibit a decreasing trend from 2006 to 2021, and the CIR presents an upward trend. CIR and CO2 emissions show apparent geographical differences. (2) CIR effectively reduces CO2 emissions, and this effect exhibits clear heterogeneity of different regions, resource endowment, and pilot free trade zone. CIR mitigates CO2 emissions by enhancing technological innovation and promoting human capital mobility. Market scale and industrial structure optimization act as a "magnifying glass", amplifying the impact of CIR on reducing CO2 emissions. (3) The negative spatial spillover effect of CIR on CO2 emissions shows a “V” shape characterized by strengthening and then weakening in the range of 0—700km. At this point, the 700km mark represents the decay boundary. Findings suggest that the government should enhance the domestic market environment and improve the quality of foreign trade to fulfill the role of CIR in mitigating CO2 emissions. These empirical evidence and feasible measures are provided for some countries to reduce CO2 emissions while promoting economic development.