Abstract: The transformation and upgrading of industrial structure is an inevitable requirement for China’s economy to maintain healthy and stable development in the future. Using the panel data of 31 provinces in China from 2003 to 2016, this paper uses spatial panel hysteresis model to analyze the impact of the agglomeration of producer services on the transformation and upgrading of manufacturing. The research shows that there is a spatial correlation effect on both the agglomeration of productive service industry and manufacturing transformation in China. That is to say, the concentration of productive service industry in a certain area significantly affects the concentration of productive service industries in the surrounding areas. The transformation and upgrading of manufacturing industry significantly affects the transformation and upgrading of manufacturing industries in the surrounding areas. At the same time, the concentration of productive service industries in a certain region is adjacent to the transformation and upgrading of regional manufacturing industry has a significant impact. The transformation and upgrading of manufacturing in neighboring regions has a significant impact on the transformation and upgrading of manufacturing in the region. However, the concentration of producer services in the region does not have a significant impact on the transformation and upgrading of the manufacturing industry. The reason may be that there is a threshold effect between the two. From the perspective of control variables, transportation convenience and government behavior have a significant impact on the transformation and upgrading of the manufacturing industry.