Entrepreneurship education is a critical issue for higher education (HE) students, and thus has been on the agenda of national sustainable development in China. However, few studies have approached the enhancement of HE students’ entrepreneurial competencies in relation to the perspective of their learning environment. This study developed and employed the Theoretical Model of Entrepreneurial Competencies to examine the path of improving HE students’ entrepreneurial competencies. The results reveal that a diverse learning environment is an important external factor in developing HE students’ entrepreneurial competencies. Knowledge transfer, self-efficacy, and cognitive flexibility mediate this relationship. Moreover, entrepreneurship education significantly moderates the effects of self-efficacy on HE students’ entrepreneurial competencies, but it does not play a moderating role between cognitive flexibility and entrepreneurial competencies. This study provides insights for both policy and managerial endeavors in sustainably advancing HE students’ entrepreneurship through an innovative learning environment.