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China's news agency Xinhua said the Panchen Lama participated in religious ceremonies at Lhoka/Shannon -- part of which lies in Arunachal Pradesh which China considers to be southern Tibet.
China's People's Daily newspaper said it was the first time that the 11th Panchen Lama has visited the region.
Shannon is considered the cradle of Tibetan civilisation, said Xinhua, and the Panchen Lama was greeted by thousands of Buddhists. The religious head held prayer services at Yumbu La Kang, the first Tibetan palace, and a local monastery where he blessed followers.
'I am very happy to be here because it has been my dream to come to Shannon and hold a prayer meeting here,' the Panchen Lama is reported to have told government officials.
Perhaps keeping sensitivities in mind, the Panchen Lama did not get close to the line of control between the two Asian giants, and only visited the Trandruk temple in Nedong, one of the oldest monasteries in Tibet.
Neither India nor the Dalai Lama, who sought refuge in India in 1959, has so far reacted to the Panchen Lama's visit.