With the economic development of various countries entering a new stage, sustainable development has become a focus of development transformation. It is well known that outward foreign direct investment (OFDI) drives the development of the manufacturing industry. However, the OFDI’s influence mechanism on the sustainable development of the manufacturing industry still needs to be clarified, and its specific action path requires further exploration. This study thus constructs a performance evaluation indicator system for the manufacturing industry from sustainable perspective. Based on interprovincial panel data of China’s 30 provinces from 2008 to 2017, the entropy method is used to measure and analyse the sustainable development level of the manufacturing industry in each province. Second, the influence of OFDI on the sustainable development level of manufacturing industry is verified using a fixed effects model. Finally, through the establishment of the mediation effect and threshold effect models, we conduct in-depth research on its specific mechanism, testing the mediation effect of technological progress and threshold effect of openness. The results reveal that government departments can enhance the sustainable development of manufacturing industry by promoting technological progress through OFDI. Improving the degree of openness can also promote sustainable development in the manufacturing industry.