The rapid pace of urbanization has led to severe urban problems, with urban renewal emerging as an effective strategy to mitigate them. The City Betterment and Ecological Restoration (CBER) pilot scheme was an experimental policy aimed at urban renewal. Based on an optimized propensity score matching difference-in-differences model, the impact of the CBER pilot scheme on urban disease was examined. The results were threefold. (1) The CBER pilot scheme significantly alleviated urban disease in pilot cities. (2) The impact of the CBER pilot scheme was more pronounced in eastern and central regions of China, as well as in cities with high economic development, robust government capacity and abundant human resource. (3) Industrial structure optimization, infrastructure development and consumption upgrading were all effective pathways for mitigating urban disease through urban renewal. The findings offer valuable insights for other countries and regions to address urban problems and advance urbanization.