Abstract: The formal system has an extremely important influence on the strategic decision-making of firms’ environmental innovation. Firstly, based on a systematic review of 323 related papers, this study summarized the definition, classification and measurement methods of formal institutions, and discussed the influence of political system, economic system and legal system on firms’ environmental innovation. Secondly, it deeply analyzed the complex mechanism between formal institutions and firms’ environmental innovation, summarized the mediating role of variables such as national innovation system, financing constraints, and knowledge acquisition, and the moderating role played by variables such as enterprise scale, dynamic capacity, and absorptive capacity, and constructs the research framework of this hotspot field. Finally, a summary is made based on previous related research, and future prospects are proposed.