A 3-km-long water route was formed in the city by using cofferdams to enlarge a stream for recreational and tourist use.
Three cruise boats, decorated in traditional Tibetan style, will take tourists on tours of the city's landmarks, including the Potala Palace and Drepung Monastery, state-run Xinhua news agency reported.
In order to cut emissions, the boats are powered by liquefied gas.
One ride costs 120 yuan (USD 19) in the summer and 60 yuan (USD 9.5) during the winter low season.
Lhasa, situated at an altitude of 3,700 metre, is also known as 'roof of the world' for its remote and high-altitude mountains.
The city hosted 2.8 million tourists from January to June this year, including 41,804 foreign tourists.
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