Combating climate change by increasing urban carbon storage is one of the critical issues which urban policymakers must address. Understanding the characteristics and driving factors of carbon storage changes during urbanization can assist urban managers in formulating responsive land use policies. This study employs the INVEST model to evaluate carbon storage in Shanghai from 2000 to 2020, analyzing land use changes and their carbon impacts. It analyzes the transformation of land use in Shanghai during the same period and its impact on carbon storage. Using a 1 km grid for sampling, this study examines the spatiotemporal distribution patterns of carbon storage in Shanghai. Furthermore, it employs linear regression to discuss the social and economic drivers influencing carbon storage in the city. Carbon storage in Shanghai, predominantly from cultivated land and artificial surfaces, increased from 16.78 Mt in 2000 to 18.40 Mt in 2020, with an annual rise of 0.81 Mt. The spatial distribution of carbon storage exhibited a stable southeast-northwest pattern, with variations in dispersion between the north-south and east-west directions. The distribution of carbon storage shifted from a bimodal to a unimodal pattern, indicating an overall increase. There was a significant positive correlation between carbon storage and both the per capita green space area and the industrial output value, which can be attributed to Shanghai’s policies on green industrial development. This research aids in formulating land use policies to enhance urban carbon storage.