Cultural tourism has emerged as a key factor in destination development, but moving from growth-oriented expansion to sustainability necessitates a better comprehension of the psychological processes influencing visitor involvement. Existing studies insufficiently integrate destination-level diversification with tourist psychological identity, particularly within emerging economies. Drawing on a diversified development framework, this study constructs a theoretical model linking economic, cultural, social, and environmental dimensions with tourist psychological identity and sustainable destination development. Questionnaire data from 300 respondents were analyzed using regression analysis to examine direct and indirect effects across influencing factors. Economic development (β = 0.45), government policy support (β = 0.23), and investment orientation (β = 0.32) significantly strengthen sustainable cultural tourism development. Cultural resources (β = 0.51), cultural exchange (β = 0.27), and creative industries (β = 0.18) also exhibit strong positive effects. Tourist psychological identity is shaped by personal economic status (β = 0.42), cultural experience (β = 0.33), and social recommendations (β = 0.35). Moreover, psychological identity exerts a substantial influence on sustainable development (β = 0.56), indicating a reinforcing mechanism between destination diversification and long-term sustainability. Findings demonstrate that diversified development pathways enhance both destination sustainability and tourists’ psychological attachment, offering actionable implications for destination marketing and management. This study contributes to shifting tourism development from a growth paradigm toward a sustainability paradigm, supporting SDGs 8, 11, and 12.