Optimizing resource allocation is the basic goal of building a large national unified market, and this paper constructs a theoretical analysis framework of “digital economy-marketization-resource allocation” based on the market-oriented perspective of market price, competition and risk mechanism, and based on the development practice of China’s urban digital economy. And using the data of national prefecture-level cities, we empirically find that: the development of digital economy significantly improves resource allocation distortion, and this conclusion still holds after considering the index measurement error, endogeneity problems and exogenous policy shocks; marketization is an effective way for digital economy to improve resource allocation efficiency; the optimization of digital economy on resource allocation distortion The optimization effect of digital economy on resource allocation distortions is non-linear with decreasing margins, and there is a progressive logic of “capital-product-labor” in the structural difference of the optimization effect; the development of digital economy can improve the endogenous interaction cycle of product and capital allocation distortions reinforcing each other among cities, but it may also be affected by the “rainbow” between cities. The development of digital economy can improve the endogenous interactive cycle of product and capital allocation distortions reinforcing each other among cities, but it may also lead to “new distortions” in labor allocation in space due to the “siphon effect” among cities.