Midu Lantern, an important genre of Yunnan lanterns, has a national-level intangible cultural heritage and possesses profound historical and cultural significance along with unique artistic charm. Through analyzing the historical origins, artistic characteristics, and current inheritance status of Midu Lantern, this paper explores strategies for its preservation, innovation, and IP-based development path. The study suggests that Midu Lantern should innovate and develop while preserving its traditional characteristics, based on inheriting traditional skills and combining modern technology with market demands. By creating an IP image, developing cultural and creative products, and organizing cultural activities, the popularity and influence of Midu Lantern can be enhanced, realizing its sustainable development in contemporary society.