State television CCTV showed armoured vehicles moving on a desert track, groups of soldiers firing automatic weapons and cannon pointing towards the horizon.
Dozens of soldiers have been deployed in temperatures above 40 degrees Celsius (104 F) "to reinforce their hardiness in combat and their mastery of military techniques", the report said.
"This is the first time that officers and soldiers stationed in Djibouti have left their camp to conduct live- fire exercises," Liang Yang, the base commander, told the broadcaster.
Personnel will mainly focus on supporting UN peacekeeping operations, evacuating Chinese nationals and providing naval escorts, according to the Ministry of National Defence.
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The Chinese navy has since 2008 had a presence off Somalia and the Gulf of Aden as part of international efforts to combat piracy.
"This modest live-fire drill was apparently conducted on a designated firing range in Djibouti, and involved a small- scale force, perhaps just a single platoon or maybe a few platoons," said James Char, a specialist in the Chinese army at Singapore's Nanyang Technological University.
Djibouti is strategically located on the Strait of Bab- el-Mandeb, controlling access to the Red Sea.