Having a reasonable environmental management system is key to achieve regional green development. This article integrates environmental decentralization into an environmental/economic analytical framework, introducing a fiscal decentralization indicator to explore the mechanism of environmental decentralization and regional green development, and then tests this concept using Chinese provincial penal data. The results show that the spillover effect of green development is significant: Improving regional green development will promote green development in neighboring regions. At the national level, different categories of environmental decentralization have different effects, and these can also affect green development through both direct and indirect paths. There is also a positive interaction mechanism between these two variables. Moreover, the interaction between environmental and fiscal decentralization has a negative effect on regional green development, with the impact varying across regions. These findings play an important role in green development, industrial transformation, and advancement, especially in China.