In this paper, we explore whether and how circular economy policies stimulate green innovation. At the dawn of this century, China launched the circular economy pilot policy (CEPP). Using the panel data of 284 Chinese prefectures, we estimate the effect of this pilot policy on green patent applications. Our findings indicate a significant positive effect of CEPP on green patent applications, including green invention patents and green utility model patents. Mechanism analysis shows that CEPP significantly increases government attention on science and technology and promotes economic agglomeration, which further provides a more conducive environment for market entities to innovate through open innovation. Further heterogeneous analysis reveals that the impact of CEPP on green innovation is greater in southern and developed cities, cities with greater education resources, and cities that are less dependent on natural resource endowments