With the rapid development of knowledge economy, a number of important shifts are emerging in urbanization pattern across the world. Traditional urbanization theory has become hard to interpret these changes on a global scale, and "innovation" is a core concept to explain the new changes of the urbanization dynamics. As one of the important contents of urban geography, urbanization dynamic needs to turn from the general population flows between rural and urban areas into emphasizing high skilled migrants flow among cities and regions research. Against this background, we propose a conception of innovation-based urbanization. Using this concept, this study analyzes the spatial distribution characteristics of high skilled migrants and cultural diversity on urban innovation in China, based on the data of the sixth census of 270 cities at the prefecture level or above in China. This study measures the extent to which highly skilled migrants and cultural diversity increase urban innovation, by using spatial Durbin method to construct urban innovation regression model, to support the concept of innovation-based urbanization. The result shows that: first of all, the concept of innovation-based urbanization conforms to the development of knowledge economy, which emphasizes the migration process of highly skilled labor to cities. It helps to promote the changes in urban functions and landscapes and the expansion of urban knowledge activities, which undelines new dynamics of urban development, innovative landscape. Secondly, innovation urbanization based on highly skilled migrants flow is an important driving force for the development of Chinese cities, especially for eastern coastal cities and capital cities. Thirdly, the scale of highly skilled migrants flow and the level of urban cultural diversity in China both have been demonstrated of having positive effect on urban innovation output. With other conditions unchanged, a 10% increase in the number of urban highly skilled migrants and urban cultural diversity will directly result in an increase of 3% and 2% in urban innovation output respectively. This research has deepened our understanding and awareness of the openness and dynamics of the regional innovation system, and it has also provided an important theoretical basis for the formulation of urbanization and urban development policy under knowledge economy.