Continuous resource misallocation not only results in total factor productivity loss but also leads to ecological degradation. Therefore, in the process of changing from extensive growth to intensive growth, Chinese agriculture should pay attention to the problem of resource misallocation. There is currently a lack of relevant research, especially concerning the spatial spillover effects of resource misallocation at the city level. To fill this gap, we employ a spatial panel model for empirical testing on the basis of measuring agricultural green total factor productivity (GTFP) in 306 cities in China from 1996–2017. We found that there is positive spatial autocorrelation in Chinese agricultural GTFP, but it decreases year by year. Misallocation in land, labor, machinery and fertilizer all directly hinder the local GTFP. The eastern is mainly negatively affected by neighbor resource misallocation, while the central and western are mainly negatively affected by local resource misallocation. Finally, the indirect effect of neighbor resource misallocation on GTFP gradually shifts from inhibiting effect to a facilitating effect with increasing spatial distance. These findings have clear policy implications: Chinese government should strengthen agricultural green technology innovation and diffusion, strengthen environmental regulation and promote the free movement of labor between regions and sectors.