The impact and its functioning mechanisms of producer services agglomeration on enterprises' innovation have been studied based on the data from 2003 to 2013, from China Industrial Enterprise database, patent search database of China National Intellectual Property Administration to construct innovation indexes at enterprise level, and China City Statistical Yearbook to construct producer services agglomeration indexes at city level. It has been found that both specialized and diversified agglomeration of producer services industries have significant promotion effects on enterprise innovation, and the promotion effect of diversified agglomeration is greater than that of specialized agglomeration on enterprise innovation; that producer services agglomeration significantly promotes enterprise innovation through such channels as spatial technology spillover effect and input-output correlation effect; and that the impacts of producer services agglomeration are heterogeneous on innovation of enterprises with different natures, different city sizes, different factors intensity, and different patent types. The results have important policy reference value for giving full play to technological innovation effect of producer services agglomeration at the enterprise level, and for achieving high-quality economic development.