<p>In the process of rapid urbanization, the behavior of local governments inevitably impacts urban land use efficiency (ULUE). However, existing research has yet to focus on the comprehensive effects of PILOT FREE TRADE ZONES (PFTZ) policies on ULUE. Addressing this gap, this study utilizes panel data from 279 Chinese cities spanning 2007 to 2019 and employs a difference-in-differences (DID) strategy to identify the impact of PFTZ policies on ULUE. The findings reveal that PFTZ policies significantly enhance ULUE. This conclusion is robust across various tests, including controlling for interference from related policies, mitigating potential endogeneity using the PSM-DID approach, and substituting alternative dependent variables. Further mechanism analysis confirms that PFTZ policies release their policy dividends on ULUE through enhancing the collaborative agglomeration of modern service and manufacturing industries, promoting industrial structure adjustment, and advancing market-oriented reforms in land transactions. Additionally, heterogeneity analysis reveals that the policy effects are stronger for cities selected earlier in the PFTZ program and that the ULUE improvement effects are more pronounced in inland and western regions. These findings provide a novel perspective and theoretical foundation for adopting differentiated, precise, and targeted PFTZ policies to explore the patterns and optimization paths of land use, thereby enhancing ULUE and achieving long-term and sustained policy dividends.</p> Graphical Abstract <p></p>