Rare earth elements (REE) serve as effective tracers of water-rock interactions, a crucial process in the evolution of geothermal systems. However, the geochemical behavior of REE during their migration within geothermal systems, particularly the fractionation mechanism, remains poorly understood. In this study, we focus on the geochemical characteristics of REE in hot springs, host rocks, and sinters from various hot spring systems in the Yadong-Gulu rift (YGR), the largest extensional rift in the southern Tibetan Plateau. The objective is to explore the factors that control REE concentrations in hot springs and elucidate the fractionation of REE during their migration. The concentrations of REE are significantly influenced by pH, Fe oxides (oxyhydroxides), and HCO3− concentrations in central and southern hot springs, whereas high reservoir temperatures contribute to higher ΣREE concentrations in northern hyperthermal springs. REE speciation calculations show that LnO2− and LnO2H are dominant complexes in northern alkaline hot springs, while carbonate complexes (LnCO3+ and Ln(CO3)2−) prevail in central and southern spring samples. Additionally, weakly acidic hot springs exhibit a prevalence of Ln3+, LnF2+, and LnSO4+ species. The chondrite-normalized REE patterns of all hot spring samples display enrichment in MREE, which is significantly distinct from the patterns observed in host rocks and sinters enriched in LREE. The fractionation of REE in the YGR hot spring systems is primarily controlled by the following processes: (1) Temperature, pH, and relative abundance of complexing agents influence the complexation of REE and further regulate their fractionation in hot springs; (2) During water-rock interaction, preferential leaching of HREE and MREE from host rocks can lead to their enrichment in alkaline hot springs. The dissolution of iron-rich sediments plays a significant role in generating the distinctive MREE bulge pattern in acid-neutral hot springs compared to host rocks; (3) The higher stability of MREE and HREE complexes in water, as well as the preferential coprecipitation of unstable LnCO3+ complexes formed by LREE with carbonates, are key factors responsible for LREE enrichment in sinters.