Background: Indoor dining is one of the potential drivers of COVID-19 transmission. We used the heterogeneity among state government preemption of city indoor dining closures to estimate the impact of keeping indoor dining closed on COVID-19 incidence. Methods: We obtained case rates and city or state reopening dates from March to October 2020 in 11 US cities. We categorized cities as treatment cities that were allowed by the state to reopen but kept indoor dining closed or comparison cities that would have kept indoor dining closed but that were preempted by their state and had to reopen indoor dining. We modeled associations using a difference-in-difference approach and an event study specification. We ran negative binomial regression models, with city-day as the unit of analysis, city population as an offset, and controlling for time-varying nonpharmaceutical interventions, as well as city and time fixed effects in sensitivity analysis and the event study specification. Results: Keeping indoor dining closed was associated with a 55% (IRR = 0.45; 95% confidence intervals = 0.21, 0.99) decline in the new COVID-19 case rate over 6 weeks compared with cities that reopened indoor dining, and these results were consistent after testing alternative modeling strategies. Conclusions: Keeping indoor dining closed may be directly or indirectly associated with reductions in COVID-19 spread. Evidence of the relationship between indoor dining and COVID-19 case rates can inform policies to restrict indoor dining as a tailored strategy to reduce COVID-19 incidence. See video abstract at, http://links.lww.com/EDE/B902.