The digital revolution has swept the world, but the construction industry, the backbone of the global economy, has lagged. Government policy is expected to promote the development of digital technologies centered around building information modeling (BIM) in the construction industry. However, how digital technology–related policies diffuse within a country and influence innovation regionally remains unknown. Using 2011–2019 panel data from 31 provinces in mainland China, we found that BIM policy diffuses not only vertically among national and regional governments, but also horizontally among neighboring regional governments, both of which accelerate the adoption of BIM policy in various regions across the country. We also found that there is a causal relationship between regional BIM policies and related BIM innovation. Further, the positive influence of policies on innovation is more significant in regions with low economic development and high openness levels. This study not only contributes to understanding the impact of policy diffusion on BIM innovation, but also offers insights into the research on policies and innovation of digital technology in the construction industry from a macro perspective. The empirical evidence provides a practical reference for policymakers to accelerate the adoption of digital technology policy within the country and promote technological innovation.