Lhasa, literally means "place of the gods", and has a history stretching back more than 1,300 years. Before the 7th Century, the place was called "Womatang" and was only a grazing land administrated by a small Tibetan tribe. 

In BC 639 and 641, Songtsn Gampo, who by this time had conquered the whole Tibetan region, is said to have contracted two alliance marriages, firstly to a Princess Bhrikuti of Nepal and then, two years later, to Princess Wen Cheng of the Imperial Tang court. In 641 he constructed the Jokhang (or Rasa Trülnang Tsulagkhang) and Ramoche Temples in Lhasa in order to house two Buddha statues, the Akshobhya Vajra (depicting the Buddha at the age of eight) and the Jowo Sakyamuni (depicting Buddha at the age of twelve), respectively brought to his court by the princesses. Lhasa suffered extensive damage under the reign of Langdarma in the 9th century, when the sacred sites were destroyed and desecrated and the empire fragmented. 

A Tibetan tradition mentions that after Songtsn Gampo's death in 649 B.C., the Tang Dynasty's troops captured Lhasa and burnt the Red Palace. From the fall of the monarchy in the 9th century to the accession of the 5th Dalai Lama, the centre of political power in the Tibetan region was not situated in Lhasa. By the 15th century, the city of Lhasa had risen to prominence following the founding of three large Gelugpa monasteries by Je Tsongkhapa and his disciples. The three monasteries are Ganden, Sera and Drepung which were built as part of the puritanical Buddhist revival in Tibet.

The fifth Dalai Lama, Lobsang Gyatso (1617–1682), unified Tibet and, in 1642, moved the centre of his administration to Lhasa, which thereafter became both the religious and political capital. In 1645, the reconstruction of the Potala Palace began on Red Hill. In 1648, the Potrang Karpo (White Palace) of the Potala was completed, and the Potala was used as a winter palace by the Dalai Lama from that time onwards. The Potrang Marpo (Red Palace) was added between 1690 and 1694.

By the end of the 17th century, Lhasa's Barkhor area formed a bustling market for foreign goods. The Jesuit missionary, Ippolito Desideri reported in 1716 that the city had a cosmopolitan community of Mongol, Chinese, Muscovite, Armenian, Kashmiri, Nepalese and Northern Indian traders. In November 11 of 1750, the murder of the regent by the Ambans triggered a riot in the city that left more than a hundred people killed, including the Ambans.

By the 20th century, Lhasa, long a beacon for both Tibetan and foreign Buddhists, had numerous ethnically and religiously distinct communities, among them Kashmiri Muslims, Ladakhi merchants, Sikh converts to Islam, and Chinese traders and officials.

After Deng Xiao Ping's southern tour in 1992, Lhasa was declared a special economic zone.

The Potala Palace in Lhasa