The development of industry convergence can create integrated innovation， and it is an essential way for economic development driving force to transit from factor-driven and investment-driven stage to innovation-driven stage. And， synergy and co-agglomeration of industries（hereinafter referred to as SCI） is the spatial platform for industry convergence to happen in practice. Nowadays， it is an important trend to improve the city productivity and competitiveness， and a critical approach to optimize the industrial spatial distribution and promote the economic structure transition by forming SCI in limited space and promoting its level． By constructing the general analysis framework， this paper systematically examines the mechanism of cities’ productivity improvement based on SCI under the background of integrated innovation and conversion of driving force for economic development in China. SCI has ″Industry″ and ″Space″ dual character. On the one hand， the SCI can create innovation through labor specialization and technical externality， which lead to the improvement of cities’ labor productivity， and it is the channel to realize the conversion of development driving force; on the other hand， the SCI and city spatial structure mutually reinforce and generate circular cumulative causation under the effect of transportation costs and ″face-to-face″ contact needs. Therefore， this paper builds a bridge between the SCI and the improvement of city productivity theoretically， and provides a theoretical basis for promoting the level of SCI by adjusting the cities’ spatial structure． This paper mainly investigates the productivity improvement effect and the spatial spillover effect of SCI on cities’ labor productivity by utilizing the modified E-G index. A spatial econometric analysis across 240 Chinese cities in the year of 2004—2012 shows that SCI has a positive impact on higher productivity in these cities， and neighboring cities’ productivity improvement also has a positive impact on local cities. However， the positive relationship between co-agglomeration and productivity shows regional disparity and industrial heterogeneity. Results indicate that the productivity improvement of Central and Western regions is mainly investment-driven， while Eastern region is transforming from factor-driven and investment-driven stage to innovation-driven stage. The productivity improvement effect is not identical to all industries. The coefficient shows magnitude difference in response to the level of SCI. Thus， the development of industry requires more refined and differentiated policies according to the regional disparity and industrial heterogeneity of productivity improvement effect. Specifically， cities in eastern region should deepen the industrial division and promote industrial integration， especially the synergy and co-agglomeration among different industries of producer services. By contrast， cities in central and western regions should promote the prolongation of industrial chain both horizontally and vertically， avoid homogeneous competition and optimize the industrial structure by taking advantage of leading industries． Moreover， the spatial spillover effect of SCI on cities’ labor productivity diminishes along with the increase of physical distance under the influence of transportation costs and ″face-to-face″ contact needs. The strongest spatial spillover effect works within a distance of 300 kilometers and diminishes significantly after 750 kilometers. Therefore， policy implications for current Chinese regional development strategies may be drawn from this analysis. Industry guidance should break through administrative division restrictions and distribute industrial elements reasonably under the implementation of urban integration. Strengthening infrastructure construction and improving the infrastructure capacity， especially intercity transport infrastructure construction and capacity improvement， in order to promote the free flow of industrial elements in a wider space and reshape the spatial pattern of economic connection， to encourage mutually beneficial interactions between neighboring cities by utilizing positive externality （economy of scale and knowledge spillover） of urban integration to decrease the negative externality （crowding effect） of single city．