At a historical moment when China’s urbanization rate has exceeded 65%, the logic of urban development is shifting from incremental expansion to the quality improvement of existing space. Urban renewal, as a key carrier of this transition, faces multiple governance dilemmas, including spatial dysfunction, industrial hollowing-out, and cultural rupture. With strong integrative capacity, permeability, and spillover effects, the culture-tourism industry has become a crucial variable for addressing these problems. However, existing studies have often focused on either economic evaluation or physical spatial transformation, leaving the black box of how culture and tourism become deeply involved in the renewal of urban systems insufficiently explained. From the dual perspectives of embeddedness theory and public value theory, this paper develops a coupled framework linking institutional, economic, and cultural embeddedness with the creation of economic, social, and cultural public value. Taking Beijing 798 Art District as a typical case of industrial heritage renewal, the study finds that the culture-tourism industry is not merely an additive element in urban renewal. Rather, it gains institutional support through institutional embeddedness, activates endogenous growth through capital and industrial-chain embeddedness, and reshapes spatial meaning through symbolic and memory embeddedness. These processes jointly promote spatial reproduction, collaborative governance, and cultural resilience. Accordingly, the paper proposes implementation paths involving top-level design, industrial ecosystem reconstruction, spatial narrative activation, and multi-actor co-governance, aiming to provide theoretical reference and practical inspiration for organic urban renewal in China.