The majority of research about tobacco use in China focuses on Han Chinese, the main ethnic group comprising over 90 per cent of the population, and a paucity of research exists on ethnic minorities. The present study elucidates tobacco use among the Dai people, an ethnic group in Yunnan Province, Southwest China. The study design consisted of interviews and grounded theory methodology in a symbolic interactionist theoretical framework. The categories of the grounded theory revealed tobacco consumption was weaved in a complex web of meanings: social practices, perceptions of health, and work lives as agriculturalists, situated in Dai cultural and social milieu. An important finding was the stage‐managing of tobacco as a symbol of ‘tradition’ versus ‘modernity’: Through a process of contested modernity, the older men championed long‐standing tobacco customs as representative of Dai heritage and thus their own tobacco use as upholding traditions amid encroaching cultural and societal change in China. These findings are important because little is known about Dai people's tobacco use and how they are responding to social change. There are also implications for the development of culturally‐appropriate tobacco control strategies.