Smart city construction will have a profound impact on urban development and regional pattern, and it is necessary to explore its impact on new urbanization and regional market integration, so as to provide empirical evidence for accelerating the construction of smart cities. Based on the panel data of 238 prefecture-level cities from 2005 to 2019, this study considers the establishment of the national smart city pilot as a quasi-natural experiment and includes it in the analysis of the factors influencing market integration. The multi-period difference method was used to empirically investigate the influence of smart city pilot construction on market integration at the prefecture-level city level. The conclusions are as follows. According to the calculation results, the degree of inter-city market segmentation in the whole sample period from 2005 to 2019 showed a trend of shock decline, except that the degree of inter-city market segmentation increased in 2008 and 2009. The benchmark regression results show that although smart city pilot construction can promote economic urbanization, social urbanization, and environmental urbanization of the pilot cities, it is not conducive to market integration among cities. The conclusion that smart city construction will intensify market segmentation remains valid even after a series of robustness tests. The influence of smart city construction on inter-city market integration varies according to city level, city size, and city location, which is mainly manifested in the fact that it significantly inhibits the market integration of low-level cities, small and medium-sized cities, and inland cities, and significantly promotes the market integration of big cities and coastal cities. The influence mechanism shows that narrowing the information infrastructure gap not only helps in playing the role of smart city construction in promoting the development of new urbanization but also promotes market integration among cities. Narrowing the gap in public expenditure is conducive to the promotion of smart city construction for social urbanization and alleviates market segmentation among cities. Promoting the development of secondary industries can enhance environmental urbanization and ease market segmentation. Therefore, in the context of building a national unified large market, the pilot construction of smart cities should pay full attention to the negative effects of the "digital divide" between regions, encourage some localities with conditions to strengthen the construction of smart cities independently, and prevent the "digital divide" between regions from widening. This study further enriches the research on the factors influencing market integration at the city level and simultaneously provides some references for urban digital transformation and the development of new urbanization.