China is a major producer and exporter of industrial hemp, an important cash crop. However, the lagged-behind seed industry has imposed serious challenges to the high-quality development of industrial hemp in China. Applying the on-site and documentary survey methods, this paper examined the development trends and problems of domestic industrial hemp seed industry and explored the innovative development path of industrial hemp seed industry in China. Results show that China is forming a policy system integrating industry standards with local legislation, shifting the subjects of breeding innovation from public-interest scientific institutes to enterprises, establishing a breeding system characterized by multi-use targets, and enhancing planting and technical service based on regionalization of improved varieties. In addition to the great progress, the industry still faces some big challenges, including the lack of law and regulation system at the country-level or at the inter-regional level, dispersive and low-efficient use of innovation resources, multinational seed companies with first-mover advantage, especially in the intellectual property layout, and the imperfection in commercialized breeding system. To improve the innovation ability of hemp seed industry, this study suggests promoting the construction of a policy system, a multi-purpose breeding system, a production and management system, and an international cooperation system.