Abstract: The connotation and forms of industrial co-agglomeration are evolving under the influence of the digital economy. Exploring the current changes in the form of industrial co-agglomeration is of great significance for optimizing industrial layout and achieving high-quality economic development. However, existing research often focuses on the geographical dimension, neglecting the integration with the virtual dimension. This paper constructed a theoretical framework using a general equilibrium model of endogenous division of labor and examined impact of the digital economy on industrial co-agglomeration. Based on this, it further analyzed the characteristics of these effects by incorporating the virtual dimension. The study indicates that the digital economy weakens industrial co-agglomeration in geographical space, an effect mediated through internal environment optimization and changes in the external industrial environment. Further analysis reveals that whether reshaping effect of digital economy on urban industrial co-agglomeration manifests as a dividend depend on differences in location, industry, market, infrastructure, and types of agglomeration. This research offers a crucial perspective for understanding the new dynamics of industrial co-agglomeration in the digital economy era and provides valuable insights for optimizing industrial layout and enhancing regional development quality.