Under the Qing dynasty (1644–1911/12) Gyangzê was a frontier defense post with a small Chinese garrison and a much larger Tibetan guard force. Its importance was, however, largely commercial. It was a great marketplace to which caravans from the interior of Tibet brought gold, salt, musk, wool, and hides, which were bartered with Indian and Nepalese merchants for tea, tobacco, sugar, cloth, and metal goods. The town's importance as the chief market of south-central Tibet was increased when, following the Lhasa Treaty of 1904 between Tibet and the United Kingdom and its modification by the Anglo-Chinese Convention of 1906, it was opened to foreign trade, and a British resident was stationed there.

After China closed the border between the Tibet Autonomous Region and adjacent countries, Gyangzê for a time lost some of its importance as a centre of seasonal trade. However, with the initiation of economic reforms and a more open policy in the early 1980s, Gyangzê again manifested its importance as a goods-collecting and distribution centre in the area with business relations with India and Bhutan. Under a mutual-aid program between Gyangzê and the eastern Chinese city of Shanghai, started in 1994, the town has greatly improved its infrastructure.

Gyangzê produces high-quality Tibetan carpets, which are acclaimed both domestically and abroad. The national government has designated it one of the country's historical and cultural towns. The famous Palcho (Baiju) Monastery, northeast of the town and first constructed during the 1430s, allows three major sects of Tibetan Buddhism to coexist in one place. The Dzong (Zongshan) Fort in central Gyangzê is another historic site under national protection. Pop. (2001 est.) 10,800.