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The history of the city of Lhasa dates back to more than 1,300 years, to the time before it was the capital of Tibet. Before the discovery of the area known today as Lhasa by the Tibetan empire, it was a high altitude, marshy wilderness, in which antelopes were the main inhabitants. The area was referred to by the name of Wotang during this time before civilization.
During the early 7th century, Songtsan Gampo (the leader of Tubu tribe) discovered the Wotang valley while bathing in the Wotang River. He immediately fell in love with the area, being exceptionally impressed by the mountains that rose directly into the sky from both sides of the river. It was during this initial visit that he decided to move his Tibetan Kingdom to the Wotang valley. His personal residence was constructed on the Potala hilltop, overlooking the valley. The construction of the Jokhang (meaning sacred land) Temple was the direct result of Songtsan Gampo’s marriage to the Princess Wencheng. Upon seeing her new home in the valley, she decided that the temple needed to be built, and so it was.
Over the centuries, many Dali Lamas have resided in Lhasa, but with the recent occupation of Tibet by the Chinese, the current Lama was forced into exile.
For more information, check out this detailed history of Tibet.