Dressed up in their traditional gear, carrying scarves and flowers, the welcoming crowd bowed as his motorcade wound through the by-lanes.
After his arrival on Wednesday, the Dalai Lama went straight to his summer palace Potang, where he addressed leaders of religious, political and social organisations.
He also inquired about the situation in Ladakh, which is predominantly a Buddhist region of Jammu and Kashmir.
The Dalai Lama, the spiritual and temporal leader of Tibetans, is revered as the reincarnation of a long line of Buddhist kings.
Thousands of Tibetans led by the Dalai Lama fled to India in 1959, nine years after China's communist army entered Tibet and overthrew the Buddhist theocracy there.