By constructing the Malmquist index from the perspective of cost minimization, it is found that compared with the beginning of China's entry into WTO, the level of technological progress in the central and western regions has improved rapidly in recent years, while the pace of technological upgrading in the eastern coastal regions has slowed down. Based on the statistical analysis of the division of domestic value chain, it is found that the central and western regions are more embedded in the division of domestic value chain than the eastern coastal regions. Empirical analysis shows that vertical specialization in China is beneficial to technological progress, especially in the central and western regions. The domestic market association and the growth of local enterprises are the important channels for the vertical specialization to promote the technological progress in the inland region. In terms of the influence mechanism, the geographical space distance of the main body of the division of labor is an important factor affecting the effect of technological progress, and the vertical specialization between the eastern coastal areas and the central and western regions is conducive to narrowing the regional technological gap. Therefore, we should further break down the domestic market barriers, encourage regional division of labor and cooperation, strengthen the integration of domestic resources, and build a new mechanism of regional economic coordinated development with domestic vertical specialization.