The national flag was raised above the Potala Palace
The Chinese government is marking the 40th anniversary of the establishment of a regional government in Tibet.
The state-run media praised the economic development in Tibet during this time, and said such achievements were only possible under Chinese rule.
But human rights activists say Tibet's religious institutions have been damaged and its unique culture eroded.
China's presence in Tibet has been controversial ever since Communist troops marched into the area in 1950.
Nine years later Tibet's spiritual leader, the Dalai Lama, fled into exile, along with tens of thousands of his followers.
In 1965, the Chinese authorities announced the establishment of a regional government in Tibet, and that is the event which is being marked this week.
A 52-member government delegation is currently in the region to celebrate the anniversary, led by Jia Qinglin, China's fourth-highest ranking leader.
The festivities included a fireworks display and an evening gala in the capital, Lhasa, which was broadcast on national television.
About 23,000 people watched a flag-raising ceremony outside the Potala Palace, home of the Dalai Lama before he fled into exile.
The government delegation also announced it would give a solar energy panel to every Tibetan rural household in honour of the anniversary, according to the state news agency Xinhua.
Mr Jia shook hands with a group of Buddhist monks and urged them to be "patriotic".
Tibetans say their culture has been squashed by Han Chinese
He also used the opportunity to combat any attempts at secession.
"Separatist activities must be strictly cracked down on in accordance with law, so as to ensure social stability and state safety," Mr Jia told Xinhua.
China says suppressing unrest is vital to ensure continued economic growth in impoverished Tibet.
Beijing is proud of its economic achievements in Tibet, where the gross domestic product rose from 327m yuan ($40m) in 1965 to 21.2bn yuan ($2.6bn) in 2004, according to media sources.
"Only under the Chinese Communist party's leadership, only in the embrace of the motherland's family, only firmly on the road of socialism with Chinese characteristics, can Tibet enjoy a prosperous today and a better tomorrow," said an editorial in the state-run People's Daily newspaper on Thursday.
But the London-based Free Tibet Campaign said the official celebrations were "an attempt to undermine the Dalai Lama's call for genuine autonomy for Tibet".
"The Tibetan people will not be satisfied until there is political change which will give them genuine control of their own affairs," Alison Reynolds, director of the group, told the French news agency AFP.