In the new era, it is a major strategic plan for reform and development to establish a new development paradigm with domestic circulation as its mainstay and mutual acceleration between domestic and international circulations. In this study, the establishment of pilot free trade zones is taken as a quasi-natural experiment, and the difference-in-difference model is constructed to test the zones' influence and its mechanism on each provincial domestic and international dual circulations. The result shows that the establishment of pilot free trade zones can significantly enhance the development level of dual-circulation whose effects are generated through the mechanisms of institutional environment optimization, two-way trade synergy and two-way investment synergy, that the zones' influence has their industrial heterogeneity on constructing a new dual-circulation development paradigm, and that its effect on the secondary industry is significantly greater than that on the primary industry and the tertiary industry. Additionally, it has been testified that accelerating the institutional innovation and replication and promotion of its reform achievements of pilot free trade zones can effectively drive market agents to transfer their advantages from scale economy resulted from domestic demand into new advantages in international competition.