This paper focuses on the chain leader system, an important institutional innovation implemented by local governments in China to address internal and external shocks and promote the modernization of industrial chains. Based on a systematic review of literature related to industrial chains and the chain leader system, this paper focuses on analyzing the core mechanism of the chain leader system in promoting the modernization of local industrial chains. The research proposes that its role is mainly realized through three mechanisms: first, the coordination mechanism; second, the precise empowerment mechanism; third, the environment optimization mechanism. Based on the above mechanism analysis, this paper further puts forward policy suggestions such as improving the scientific decision-making and dynamic evaluation mechanism, promoting in-depth integration with the innovation chain and talent chain, and clarifying the boundary between the government and the market, aiming to provide theoretical reference and decision-making basis for optimizing the practice of the chain leader system and building a modern industrial system.