Local government debt (LGD), an important financing tool for local governments to achieve high-quality development, especially through the expansion of urban investment bonds led by local investment and financing platforms, has a significant impact on green development efficiency (GDE). This article starts from LGD, selects data from 30 provinces from 2010 to 2019, and uses a two-way fixed-effect model and mediation-effect model to empirically analyze the impact of LGD on GDE. The research results show that LGD has a significant inhibitory effect on GDE, and LGD can indirectly affect GDE through the degree of industrialization and the number of the urban population. This article suggests that the government should make even fuller use of LGD funds, optimize the use of relevant funds, standardize the operation of local government investment and financing platforms, reduce debt risks, promote industrial structure upgrading, promote urban population resettlement measures, and improve China’s GDE.