Accelerating the development of a unified domestic market is essential for establishing a high-level socialist market economy, which will also serve as the foundation for promoting China’s sustainable economic development. Referencing the general law of the market economy, this study analyses the internal mechanisms for accelerating the formation of a unified domestic market to promote the sustainable development of China’s economy from four dimensions, including system guarantee, impetus condition, material basis and administrative guarantee. Furthermore, an empirical analysis is conducted to identify existing challenges in this regard using the data of China’s Marketisation Index Report by Province from 2016 to 2021, which include insufficient comprehension of the concept of a unified domestic market, institutional barriers, a low degree of opening up to the outside world and uneven infrastructure development. Corresponding policy suggestions include strengthening theoretical study, research and publicity; intensifying the unification of fundamental institutional systems and market rules; and accelerating high-level opening to the outside world and market facilities’ high-quality connectivity. This research provides a theoretical and policy reference for the sustainable development of China’s economy that is broadly applicable.