Over the past three decades, the Yangtze River Delta has undergone a rapid urbanization phenomenon, resulting in pronounced urban sprawl that has significantly impacted regional sustainable development and air quality. This study constructs an urban sprawl index based on nighttime light data spanning 2000–2020 and employs exploratory spatio-temporal analysis, panel data models, and spatial econometric models to examine the evolution of urban sprawl and its effects on PM2.5 concentrations. The results reveal four key findings: (1) Urban sprawl is spatially heterogeneous, exhibiting a ‘high in the centre-east, low in the north-west’ pattern, with high-intensity sprawl expanding from the central region towards the north-west and south-west; (2) The dominant growth pattern is characterized by relatively rapid expansion. The global Moran’s I index fluctuates between 0.428 and 0.214, indicating a gradual decline in the global clustering effect of urban sprawl. Meanwhile, the share of local high–high agglomeration zones decreases to 21.9%, whereas low–low zones increase to 24.3%; (3) Spatio-temporal transitions of urban sprawl show strong spatial dependence while overall relocation exhibits inertia; (4) Before the implementation of the Ten Key Measures for Air Pollution Prevention and Control in 2013, urban sprawl significantly intensified PM2.5 pollution. Following the policy, this relationship notably reversed, with sprawl exhibiting pollution-mitigating effects in certain regions. The spatial diffusion of pollution is evident, as urban sprawl influences air quality through both local development and inter-regional interactions. This study provides an in-depth analysis of the spatio-temporal evolution of urban sprawl and establishes a framework to examine the interactive mechanisms between urban expansion and air pollution, thereby broadening perspectives on atmospheric pollution research and offering scientific and policy guidance for sustainable land use and air quality management in the Yangtze River Delta.