Abstract: The concept and definitions of environmental protection industry are not the same and with different implications and category classification internationally. Through a literature survey on the definitions of environmental protection industry, the implications and categories of environmental protection industry were identified. Current development status and key constraint factors of environmental protection industry both at home and abroad were analyzed. It is pointed out that the environmental protection industry in China presents the trend of agglomeration, clustering, specialization, high-technology and marketization. Aiming at the problems hindering the development of environmental protection industry, such as underdevelopment of environment regulation, lack of technological innovation and shortage of funds, some suggestions are put forward to encourage the construction of environmental protection industry demonstration zones which will take technological innovation as the engine. The construction will enhance the regional innovation and international competitiveness of the clustering zones.