<p>Prefabricated buildings (PBs) contribute significantly to improved construction efficiency, resource savings, and lower environmental impact. They have emerged as a pivotal pathway for the transformation of the global construction industry. However, the high construction costs have severely restricted their large-scale adoption. To systematically investigate the key influencing factors and mechanism of the construction cost of PBs, this study uses the method of combining interpretative structural model (ISM) and structural equation model (SEM), identifies the main influencing factors by synthesizing literature and data analysis, analyze hierarchical relationships between these factors via ISM, and quantifies the influence intensity and mechanism of the construction cost by SEM method. The findings demonstrate that the driving factors of the construction cost of PBs fall into several levels. The core factors, such as the assembly rate, the production scale of prefabricated components, the integration of design management, the technical level of designers, and the specialization of prefabricated components in the factory, play a crucial role in cost optimization. In conclusion, this study deeply reveals the impact mechanism of the construction cost of PBs, offering practical guidance for cost reduction and resource allocation optimization, while also providing a scientific basis for government policy-making and enterprise strategic decisions.</p>