The environmental vertical management reform (EVMR), as a pivotal institutional innovation in China’s environmental governance system, has established a breakthrough for fostering endogenous momentum in corporate green transformation by restructuring intergovernmental power-responsibility relationships and incentive mechanisms in environmental governance. This paper constructs a staggered DID model and systematically investigates the impact and mechanisms of EVMR on corporate green TFP using data from China’s A-share listed manufacturing companies from 2008 to 2023. The findings suggest that EVMR significantly enhances corporate green TFP. Mechanism testing indicates that, at the government level, by breaking local protectionism and strengthening regulatory authority, EVMR increases local governments’ willingness to govern the environment, forcing enterprises to respond with green production through “hard constraints” of environmental regulations and thus stimulating their motivation for green production. At the firm level, stringent regulations driven by the reform encourage enterprises to optimize resource allocation and increase R&D and environmental protection investment, thereby effectively raising their green TFP. At the public level, the reform increases local governments’ willingness to govern the environment and raises public attention to environmental governance, forming a binding and supervisory mechanism that compels enterprises to pursue green transformation. Accordingly, EVMR effectively promotes the establishment of a multi-agent collaborative governance path involving “government-enterprise-public” to enhance corporate green TFP. Heterogeneity analysis indicates that the policy effect varies depending on enterprises’ external environments and internal attributes, with a more pronounced impact observed in enterprises with a higher level of marketization and lower economic growth pressure, enterprises in key pollution-intensive industries, state-owned enterprises, and county-level enterprises. Furthermore, this positive effect is more significant in the context of higher corporate green TFP, demonstrating a synergistic interaction effect between institutional innovation and corporate green transformation. This paper provides critical decision-making insights for building a long-term mechanism for environmental governance, stimulating the endogenous driving force of corporate green transformation, and advancing the modernization of environmental governance capabilities.