The inner mechanism of digital economy on the FDI location choice is theoretically analyzed. Based on the data of China''s 284 prefecture-level cities from 2011 to 2018, the index of digital economy is built to empirically measure its impacts on the location choice of FDI by using the dual-way fixed effects model. In addition, the indirect influence mechanism and series of heterogeneity characteristics of digital economy are further examined. The results indicate that the development of digital economy promotes urban FDI inflows, and indirectly improves manufacturing industry to strengthen its function. The conclusion is still valid after various robust tests. Furthermore, in view of the heterogeneity, the positive effect is more significant in cities with "Broadband China", the eastern cities and high level of digital economy. Mechanism analysis shows that digital economy affects FDI by improving Fintech and stimulating resident''s entrepreneurial channels. These findings provide new thought and empirical basis for China to consolidate the development of digital economy , expand opening up and stabilize the foreign capital in the new era.