The city of Lhasa is located on a plain of marshy grounds, dominated by the three hills, Marpori ("red mountain"), Chakpori ("iron mountain") and Barmari ("rabbit mountain"). The Lhasa valley is sheltered from the harsh winds that roam much of the Tibetan plateau, and the city benefits from a micro-climate that can be termed moderate. Recent maximum summer daytime temperature was 28 degrees Celsius, wintertime temperatures average -15 degrees Celsius at night. The air is extremely dry throughout most of the year except during the summer rainy season (July-August). Lhasa has more than 300 days of sunshine a year.

In the Lhasa valley, to the north of the city area near present-day Sera monastery, the Neolithic settlement of Chugong was excavated in the 1980s. The time of Chugong can be dated back to about 1500 - 2000BC. Bronze and stone tools were found, leading to the assumption that the Chugong people practiced agriculture, animal husbandry and hunting.Tibetan recorded history began in 127 BC when the first emperor Nyatri Tsenpo (gNya'.khri.btsan.po) was crowned. During the first half of the 7th century AD, the 33rd Tibetan king, Srongtsan Gampo created an empire that largely corresponds to the present-day extension of the Tibetan cultural realm (incorporating Tibetan-speaking areas in India, Nepal, and China's Sichuan, Qinghai and Yunnan provinces as well as the Tibetan Autonomous Region itself). At that time, Tibetan society was presumably the culture of nomadic warriors, somewhat comparable perhaps to the 11th century conquering Mongols. These warriors were in constant territorial warfare with their neighbors, China 's Tang dynasty and the Uighur northern tribes, and at times even with Persia . The Tibetan royal court moved regularly throughout the country, from summer camp to winter camp.

Far from the Yarlung valley where many Tibetan kings were customarily buried, emperor Srongtsan founded Lhasa as Royal camp site in ca. 633. Originally the city had been named Rasa, meaning simply "fortified city". Various factors contributed to the establishment of Lhasa as semi-permanent royal capital. Two of the five queens of Srongtsan fulfilled an ancient prophecy by bringing Buddhist images and ritual knowledge to Tibet . Apart from Srongtsan's own palace (at the site where today's Potala Palace stands), the capital of Rasa consisted of several Buddhist temples and shrines, the queens' palaces, and presumably quarters for servants, labourers, warriors and merchants. Several imperial strongholds are known to have existed in different parts of Tibet during the flourishing of the empire period (7th-9th century).

Lhasa remained important despite subsequent kings having established their courts elsewhere because of the Rasa Trulnang Temple (miraculous self-manifest temple of Rasa ), later also called the Lhaden Tsuglakhang (Lhasa Cathedral) or simply Jokhang (house of the Jowo, a precious Buddhist image). This temple was founded in ca. 641 at the behest of princess Brikutri, the Nepali bride of king Srongtsan. The Rasa Trulnang was closely modelled on Indian Buddhist temples that were famous at that time, and was several times restored under Srongtsan's successors on the throne. Tibetan scholars name the 7th-8th century Vikramasila temple, which itself was destroyed in the 12th century, as a model for the Trulnang. Many similarities in layout and details also exist between the Trulnang and the Indian Nalanda monastery, and with the Ajanta caves. The Jowo image that eventually came to be housed in the Trulnang temple, said to have been cast during Buddha's lifetime, was the dowry of princess Wen-Cheng, Srongtsan's Chinese wife from the Tang emperor's court. Even as Lhasa 's political influence wained after Srongtsen's death, the Trulnang temple's importance was recognised again and again during the following centuries, giving Rasa the status of a Holy City and its new name Lhasa , the place of the gods.

Ever since then, Lhasa has been the capital city of Tibet . Lhasa retained its importance as a holy city for the entire realm of Lama Buddhism. Lhasa also has been, and to some extent still is, an extraordinary cultural centre, where traditional medicine, astrology, philosophy and Buddhism could be studied in great institutions of learning.