The urban land in Chengguan District of Lhasa City is close to Lalu Wetland National Nature Reserve, which leads to the contradiction between urban development and natural habitat protection. Assessing the impacts of urban expansion on natural habitat quality (NHQ) is significant to optimize urban landscape patterns and protect biodiversity in this region. Thus, this study quantitatively evaluated the comprehensive impacts of urban expansion on the NHQ in Chengguan District of Lhasa City from 1968 to 2019. Firstly, land use/cover change information in this region was obtained based on Keyhole satellite remote sensing data, Landsat remote sensing data, and Google Earth remote sensing data. Next, the effects of urban expansion on NHQ were quantified by combining spatial overlay analysis and simulation. The results showed that the urban expansion in Chengguan District of Lhasa City has been accelerating in the past 50 years. The urban area increased from 9.78 km² to 67.67 km², which increased by nearly 6 times. The urban expansion led to an accelerated decline in NHQ, which decreased by 12.69% in the last 50 years. The urban expansion had both direct and indirect effects on NHQ. Among different kinds of natural habitats, forest and wetland had obvious decline of NHQ, which decreased by 96.59% and 49.21%, respectively. Forest is mainly occupied directly by urban areas, while wetland is mainly affected indirectly by urban expansion. Therefore, it is necessary to pay attention to both the direct and indirect impacts of urban expansion on NHQ, and take effective measures to coordinate urban development and biodiversity conservation, to promote regional sustainable development.