As a cutting-edge design of institutional openness, free trade pilot zones not only provide new opportunities for foreign trade development, but also offer policy support for the evolution of specialized division of labor among enterprises. This article takes non-fi nancial listed companies in China’s Shanghai and Shenzhen stock markets from 2007 to 2022 as samples to analyze the impact and mechanism of free trade zone construction on enterprise specialization and division of labor. Research has found that: Firstly, the construction of free trade zones has a significant promoting effect on the level of specialization and division of labor of Chinese manufacturing enterprises, and this conclusion still holds true after a series of robustness tests and endogeneity treatments; Secondly, the construction of free trade zones promotes the level of specialization and division of labor among enterprises through three paths: trade growth driven mechanism, foreign investment guided leapfrog mechanism, and tax burden relief and effi ciency enhancement mechanism; Thirdly, heterogeneity analysis found that the construction of free trade zones only has a promoting eff ect on the specialization level of enterprises located in developed and moderately developed regions, with technological diversifi cation, domestic demand orientation, and small strategic diff erences. In addition, the impact of free trade zone construction on the specialization division of labor of cooperative oriented enterprises is almost twice that of competitive oriented enterprises; Fourthly, further research has found that the agglomeration of industries in free trade zones not only positively aff ects the specialization and division of labor among enterprises, but also has a signifi cant “industry chain homogeneity eff ect”. The construction of free trade zones brings about an improvement in the level of specialization and division of labor among enterprises, which further leads to the “value chain upgrading eff ect” of enterprises. Therefore, in order to expand the positive eff ects of institutional openness, this article suggests building a tax mechanism for tiered tax refunds and collaborative reductions in free trade zones, improving cross regional enclave economic digital platforms, establishing domestic demand guidance funds and technology full cycle subsidies, promoting the deep integration of industrial clusters and global value chains, accelerating the transformation of free trade zones from “single point breakthroughs” to “global empowerment”, and helping to build a new development pattern of dual circulation.