Under　dual　market　and　policy　forces,　industries　vacated　central　business　districts　in　Chinese　cities,　showing　a　decentralised　layout.　Using　Chinese　industrial　firms＇　micro-data　(2004-12),　with　township-level　division　as　the　unit,　we　describe　urban　industrial　decentralisation　and　polycentric　layout,　exploring　their　impact　on　firms＇　total　factor　productivity　(TFP).　We　found　that:　(1)　industrial　decentralisation　negatively　impacted　TFP　during　the　early　and　middle　stages　of　urbanisation;　(2)　the　polycentric　layout　can　alleviate　the　firms＇　TFP　losses　caused　by　decentralisation;　and　(3)　industrial　decentralisation　reduces　diversified　agglomeration,　lowering　TFP.　The　conclusions　of　this　study　provide　policy　recommendations　for　urban　industrial　spatial　planning.