This paper examines the impact and mechanism of digital finance on financial fraud by constructing a theoretical framework of digital finance affecting corporate financial fraud. We use panel data of Chinese A-share listed companies from 2011 to 2018. The results that digital finance can significantly inhibit corporate financial fraud and improve the ability of financial institutions to identify financial statements. Thus, the incentive and opportunity for corporations to engage in financial fraud is directly reduced. The internal mechanism shows that digital finance can restrain corporate financial fraud by alleviating the financing constraints faced by enterprises, as well as reducing corporate financial fraud by reducing corporate leverage. These effects will reduce debt pressure, thus easing the motivation of corporate financial fraud. The results of heterogeneity analysis that digital finance has a significant inhibitory effect on financial fraud of enterprises with different scales and different property rights.