The 17th and 18th centuries saw the rise and fall of the 5th through 8th Dalai Lamas. During this period, Lhasa enjoyed a relatively stable political situation, social stability, and rapid urban development. Also during this period, however, Lhasa reeled under the invasion of the Jungars, based in China's Xinjiang in 1717, and the war between the Lhasa and Xigaze areas in 1727. Both wars were suppressed by troops sent by the Central Government.

From 1727 to 1788, with the exception of short-period riots in 1750 when Prince Zholmut Namozhaleg was killed, the Lhasans lived in peace and stability. Large numbers of chic residences for nobility, residence monasteries for the Living Buddhas, government offices, stores, workshops, tea houses, restaurants, and civilian homes were built. Downtown Lhasa spread in four directions with the Jokhang Monastery at the center, reaching the Mosque in the east, the Three-Master Monastery in the south, the Glazed Bridge in the west, and the Ramoche Monastery in the north. This pattern is roughly the same as that of today. During the reign of Qing Emperor Jiaqing (1796-1821), Lhasa had a population of 30,000, and some 5,000 households.

In 1727, during the reign of Qing Emperor Yongzhen, the Central Government stationed High Commissioners in Tibet. The first High Commissioner's Office was located at Congsaikang in Lhasa. In the late 18th century, a new High Commissioner's Office was built to the west of Norbu Leuling. Lhasa residents called it "Dorsengge" (stone lion). The Qing court also stationed troops in Lhasa, with the barracks located in Zhaxi, the northern suburbs of Lhasa.

When the 7th Dalai Lama died in 1757, Qing Emperor Qianlong introduced the system of prince regents in Tibet. This means that a Grand Living Buddha was appointed the Prince Regent to act as the Dalai Lama between the time when the Dalai Lama passes away and when a new Dalai Lama comes to power. The Living Buddha Demo, the Living Buddha Cemoiling, the Living Buddha Razheng, and the Living Buddha Gongdeling all acted as Prince Regents. They all built majestic ancestral temples in Lhasa. The same period of time also saw the construction of residences for the Dalai Lamas, Grand Living Buddhas, and aristocrats. Business people from other parts of Tibet, China's hinterland, Bhutan, Nepal, and India gathered in Lhasa for business purposes. Congsaikang, Tibenkang, Gyibokang, Wangdui Xingar and Barkor Street became the five major markets in Lhasa. While the Muslims gathered in Hebailing in eastern Lhasa, working as butchers and flour grinders, people of the Han ethnic group lived in southern Lhasa, growing vegetables and making wine. These 200 years saw the fourth construction boom in Lhasa. It was also the prime time of the Gandain Phodrang regime.