Abstract: Chinese economy has entered into adjustment phase of undulation since international finance crisis in 2008. With the weakening external demand, reduction of internal investment space and weakening demographic dividend ,adjusting the industrial structure becomes the point of penetration of economic development.This thesis constructs a theoretical framework of industrial diversification, urban functional character and economic development, and then attempts to carry out a discussion on the function of urban industry structure and functional character in terms of economic growth and economic stability.In order to test the theoretical hypothesis, this thesis collects the panel data of Yangtze River Delta and Zhongyuan urban agglomeration from the year of 2003 to 2012, analyzes them empirically, and finally gets the conclusions as follows. Firstly, it depends on the effect of urban functional specialization adjustment whether the related diversification could stimulate economic growth or not; secondly, investment portfolio effect of unrelated diversification is irrelevant to urban functional character, and the function of related diversification in the employment market varies with the economic cycle; thirdly, the gap of urban industrial structure and functional character of different areas is very large, therefore, we should make industrial policies in accordance with the time and the place to promote the development of urban economy.