The report of the 20th National Congress of the Communist Party of China points out that it is necessary to “enhance the endogenous power and reliability of the domestic cycle and improve the quality and level of the international cycle”, which indicates that Chinese enterprises should explore the road of high-quality opening up in the new development pattern dominated by the domestic macro-cycle. Using an improved city-level market potential indicator to reflect domestic market advantages, this paper explores the impact of large domestic markets on product quality upgrading in manufacturing exports using matched data from Chinese industrial enterprise data, China Customs import and export trade data, and city panel data from 2003 to 2013. It is found that domestic market expansion has a significant promotion effect on the quality upgrade of China's manufacturing export products. In contrast, the international market inhibits the quality of China's manufacturing export products. The conclusion passes a series of robustness tests. Further analysis reveals that a large domestic market can improve the quality of firms' export products by lowering the average cost of firms, increasing the types of intermediate goods available to firms, and enhancing the total factor productivity of firms. The study's conclusions are of great practical significance for China's new “double-cycle” development pattern, giving full play to the advantages of the large domestic market, improving the quality of manufacturing export products, and promoting the high-quality development of the manufacturing industry.