The town has a history going back more than 800 years and was once a confluence for trade along the old tea horse road. It is famous for its orderly system of waterways and bridges. It differs from other ancient Chinese cities in architecture, history and the culture of its traditional residents the Nakhi people, therefore people there are called 胖金哥 and 胖金妹 (male and female respectively).
The town (including Dayan, Baisha and Shuhe) was registered on the UNESCOWorld Heritage List on December 4, 1997. Since then, the local government has taken more responsibility for the development and protection of the old city. Lijiang's tourism also boomed, and travellers from around the world flooded in; although many locals fear that due to much of the development, the old town of Lijiang will lose its appeal.
Recently, the government has started to develop additional "old city" sections adjacent to the site of the original old city. This is to accommodate the large number of tourists who walk the cobblestone streets (cars are not allowed in the old city), typically as part of package tours. Evenings in the old city can be particularly rowdy, not least due to the many outdoor bars, where boisterous groups of tourists try ousting other groups.
The Nakhi perform Dongjing Music, an ancient form of Taoist ritual music, in Lijiang. Lijiang is also the site of the Lijiang Snow Mountain Music Festival (丽江雪山音乐节), which features Chinese rock music. The festival was created by Chinese pop musician Cui Jian.
The influx of tourists that followed the inscription of the Ancient town of Lijiang onto UNESCO's World Heritage list has had dramatic effects. Many of the former inhabitants of the ancient city have had to move away due to rising costs of housing and food items, only to be replaced by tourist establishments. The growth of these tourism businesses is largely uncontrolled.