Abstract: House price fluctuation is an important factor affecting industrial upgrading. First of all, housing prices skyrocketed through the transmission mechanism of intermediary effect of bank credit. Then, based on 2007-2016 panel data of large and medium cities, the dynamic panel model of system GMM was used to examine house price fluctuations and the influence on industrial upgrading through bank credit intermediary effect mechanism. According to new research:first, the rapid rise of housing prices in large and medium-sized cities hadnegative effects on industrial upgrading; second, the excessive rise of housing prices in large and medium-sized cities would increase the credit demand of real estate banks, squeezing out bank funds supporting technological innovation and industrial upgrading, thus restraining industrial upgrading; third, the comparative analysis of regional differences found that there was an the intermediary effect of bank credit on the house price fluctuations and the high and new industry relationship in the eastern cities, the rise of house prices squeezed out funds for the development of high and new industries by absorbing bank credit; the rise of house prices in large and medium cities in central China squeezed out the capital of the third industry through the absorption of bank credit; but bank credit had no mediating effect on house price fluctuations and industrial upgrading in western cities.