Objective To describe the epidemiology of early-term birth (ETB) at the national level in China, and explore the association and mediating factors between ETB and policy between universal two-child policy and ETB, so as to explain the potential reason for such a relationship and provide evidence for future ETB interventions in the era of the new birth control policy. Design Cross-sectional study. Participants The cross-sectional study used data from China Labour and Delivery Survey between 2015 and 2016. A total of 75 132 survey data collected from 89 hospitals in 25 provinces were included in the analysis. We further explored the association between the universal two-child policy and ETB. Results The weighted incidence of ETB was 30.1 per 100 all births (95% CI 30.06% to 30.14%) or 29.88 per 100 live births (95% CI 29.97% to 30.05%) between 2015 and 2016 in China. There was an association between the universal two-child policy and ETB (relative risk, RR 1.19, 95% CI 1.15 to 1.23), which was not mediated by maternal age (RR 1.17, 95% CI 1.13 to 1.22), previous uterine scars (RR 1.18, 95% CI 1.14 to 1.22), parity (RR 1.19, 95% CI 1.15 to 1.24) and other measured conditions (each p<0.05). Stratified analysis showed that the association between universal two-child policy and ETB were the strongest in multiparous young women or women without previous uterine scars (each p<0.05), and disappeared in all women of advanced maternal age (each p>0.05). Conclusion The incidence of ETB was high in China when compared with most of reported countries, and there might be a link between two-child policy and ETB. Obstetric practice such as selective induced labour and caesarean section should be revised with ETB risks in mind, when ETB is more likely to happen under the universal two-child policy. Preventing ETB should not be neglected in multiparous young women or those without previous uterine scars under the new policy.