In the institutional context of transition, and by using the Chinese provincial panel data from 2001 to 2011 and threshold model to investigate the technology spillover effect of FDI and the role of different levels of intellectual property protection in the effect, we have found that, with different intellectual property protection level, technology spillover of FDI produces a significant threshold effect. With the increasing awareness of the intellectual property protection, the FDI has a greater promoting effect on technology progress in China. In addition, there is a big difference in the level of intellectual property protection in different provinces of China.