Abstract: The digital economy provides critical support for enhancing the governance capacity of local governments. It is a key force in promoting the modernization of the national governance system and governance capacity. With digital governance theory, this paper explains the impact mechanism of the digital economy on the governance capacity of local governments. Based on panel data from 30 provinces in China from 2011 to 2021, this study explores the impact of the digital economy on the governance capacity of local governments and further examines the moderating effects of informatization development level, technological innovation atmosphere, and regional heterogeneity. The results indicate that the digital economy significantly improves the governance capacity of local governments, with more pronounced effects in regions with higher levels of informatization development or technological innovation atmosphere. Regional heterogeneity analysis shows that, compared to central and western regions, the digital economy has a more significant effect on enhancing local government governance capacity in eastern regions. With the practice of the digital economy, this study provides a theoretical basis and decision-making reference for improving local government governance capacity and achieving “digital + governance capacity”.