This study examines the effect of smart city development on urban air pollution from the perspective of smart city policy implementation and smart city development framework. We manually collect data on 166 global leading smart cities from 2005 to 2020 and find evidence of a positive effect of smart city development on air pollution reduction. First, using the principal components analysis (PCA) technique, we synthesise thirty-five indicators that broadly represent the smartness of a city and generate a smart city index. Secondly, using the staggered difference-in-difference (DID) method, we find that cities experience a reduction in PM2.5 and PM10 in response to the establishment of smart city policy. Third, by using the multilevel model which accounts for country effects, we find a negative relationship between our synthesised smartness score (Smart city index) and urban air pollution. We further investigate the smart city framework and break it down into six key dimensions, including smart economy, smart governance, smart people, smart mobility, smart living, and smart environment. This allows us to test the mechanism via which smart city policy impacts urban air quality. Specifically, we find that all six dimensions strengthen the reduction effects on PM2.5 and PM10. Furthermore, our results support a moderation role of institutional quality in the relationship between smart city policy and air pollution, suggesting that smart city policy formulation and implementation along with a higher level of institutional quality produces a stronger effect on air pollution reduction. Finally, our results reveal that the average cities’ PM2.5 and PM10 reduced by 4.1% and 3.8% respectively in response to the establishment of smart city policy.