During the period of King Songtsan Gambo, the Potala Palace, the Jokhang Monastery, and the Ramoche Monastery were built. In addition, many small monasteries and palaces were constructed in Lhasa and its surrounding area. They included: the nine-story Pobengang Palace in the northern suburbs, where Tubo Minister Tome Sambozha created the Tibetan script and Songtsan Gambo studied Tibetan; three monasteries built for Sangtsan Gambo's three Tibetan concubines, with one of them built in the Zhayaba Valley in the eastern suburb for Mamsa Trizun; the monastery built for Songtsan Gambo's concubine from Zhangzhung by the Tibogor Fountain north of the Jokhang Monastery; and the monastery built for Songtsan Gambo's concubine from Moya on the eastern slope of the Tieshan (Yaowangshan) Mountain, where the Pharla Lhufo Cave Temple still exists today. Around the Jokhang and Ramoche Monasteries were built with the Prince of Dharma Palace, Monastery for the Master, military barracks, official residences, civilian housing, and stores. Dams were erected along the Gyiqoi Lhasa River to prevent flooding. In between the Jokhang and Ramoche Monasteries were built the silk and fur markets. At that time, people took ritual walks around the Jokhang Monastery.

According to the law enacted by Songtsan Gambo, Tubo was divided into several administrative divisions ruled by various princes. The Tubo King presided over exchanges with the outside world. Under the tsampo (king) were installed five business offices in charge of trade in tea, jade, knives, silks, and salt, and six crafts offices in charge of making iron objects, saddles, bows, swords, helmets, and Buddha statues. These offices played an important role in stimulating the rise of the city of Lhasa. Unfortunately, Lhasa did not continue its fast expansion after the deaths of Songtsan Gambo, two of his concubines, Tang Princess Wencheng, and Nepalese Princess Khridzun.

As the Tibetans love tea, the 4th Tubo King Dorsum Mombogyai (676-740) introduced tea and ceramics from China's hinterland. As a result, tea trade held an important position in the Lhasa market. Upon death of the Tubo King, his son Tride Zhotsan (704-754) became the Tubo King and married Tang Dynasty Princess Jincheng, another grand event in the history of friendship between the Tang and Tubo. Princess Jincheng greeted the statue of Sakyamuni, which Princess Wencheng had brought to Tubo, to the Jokhang Monastery, where it was enshrined in the Main Hall. A whole set of rituals were formulated for people to worship the statue. At this point of time, three white dagobas were built under the name of Bagagarling in between the Red Hill and the Yaowangshan Mountain, forming the major entrance to Lhasa.