Eco-industrial demonstration Parks (EIDPs) are considered a novel approach to promoting sustainable industrialization by minimizing waste and enhancing resource efficiency. This study examines the progress of the transition towards a low-carbon economy in Malaysian cities. This study applies an innovative methodological framework that integrates a non-radial Dynamic Slacks-Based Measure (DSBM) model with a staggered Difference-in-Differences (DID) design to evaluate the impact of National Eco-Industrial Demonstration Parks (NEDPs) on urban low-carbon transition in Malaysia, using panel data from 5 cities between 2015 and 2023. The National Eco-Industrial Demonstration Parks (NEDPs) policy model is utilized as a natural experiment, and the staggered difference-in-differences (DID) model is applied to understand the overall impact of the policy on the low-carbon transition in urban areas. The findings reveal that the establishment of NEDPs has significantly facilitated the transition to a low-carbon economy, and this effect remains consistent in different scenarios. Additionally, the analysis reveals that NEDPs are particularly effective in promoting the low-carbon transition in cities with local environmental regulations, high openness, and non-ancient industrial backgrounds. Through a mechanism test, the study identifies economic agglomeration, structural upgrading, and innovation networks as the channels through which NEDPs contribute to the low-carbon transition. This study argues that strengthening the development of the green finance system can enhance the positive impact of NEDPs in advancing the low-carbon transition.