Lhasa River basin is the political, economic, and cultural center of the Tibet Autonomous Region, and the state of ecological protection for Lhasa River is of vital importance to maintain the ecological security of the basin. With rapid economic development in recent years, the discharge of industrial wastewater and domestic sewage into the river has increased rapidly, and is becoming a potential risk to river water quality. Ascertaining river water quality and the water environmental capacity of surface water is of significant importance in river basin management and economic development blueprints. Based on on-site monitoring (river section, flow, water level, and water quality) and the collection of historic data (pollutant emission, hydrology, and water quality), this paper used the MIKE11 model to simulate the hydrodynamics and water quality of the mainstream through the Lhasa City. According to national standards and norms, the water environmental capacity was calculated. The results showed that:(1) The studied mainstream had a low Chemical Oxygen Demand (COD) of about 3461 t/a and a high ammonia nitrogen (NH₄⁺-N) concentration of about 602 t/a when the COD and concentration of NH₄⁺-N in inflow water in the upstream Dagzê section was equal to that of Class Ⅱ-limited surface water; the studied mainstream had a COD of about 797 t/a and a NH₄⁺-N concentration of about 1145 t/a when the COD and concentration of NH₄⁺-N in inflow water in the upstream Dagzê section was equal to the monthly mean from May 1, 2017 until May 30, 2017. (2) The major factors affecting the environmental capacity of the studied mainstream included climate change, hydro projects, upstream water quality, and self-purification capacity. The climatic warming-drying trend in Lhasa River basin after 2014 was an important factor in the reduction of mainstream runoff during the dry season, which led to the decrease in environmental capacity affected directly by a lower flow. Water intake for irrigation along the Lhasa River and the operation of the Pangduo Hydraulic Project and Zhikong Hydropower Station were also important factors affecting the downstream water environmental capacity. The accelerated mineralization of organic matter and nutrients in the ecosystem of meadows and wetlands with the background of a warming-drying climate might lead to a high COD in the upstream water. (3) For a better management of the water environment in Lhasa River basin, the effects of upstream meadows and wetlands on the water environment should be monitored, and urban sewage treatment plants and supporting facilities should be improved.