Priests and bishops in China need to be approved by the state and align with the country's official church - a law which the Vatican has contested since its introduction in 1951.
As a result, the country's 12 million Catholics have been split between the government-run Chinese Patriotic Catholic association in which the Communist Party select clergy members and the Vatican lead Catholic Church that operates underground.
The relationship between the Holy See and Beijing has been strained by the disagreement for decades.
A deal was agreed in September last year to allow both authorities to have a say on the appointment of bishops.
On Monday Yao Shun received the papal mandate - a response of the Pope, for his ordination as Bishop of Ulanqab, Inner Mongolia.
Although the Vatican has informally recognised a number of Chinese bishops in the past, it confirmed ordination of the new bishop, who it named as Antonio Yao Shun, was "the first to take place in the framework of the Provisional Agreement between the Holy See and the People's Republic of China".
Despite efforts to restore relations between Beijing and the Holy See, the agreement made last year sparked controversy among Catholic leaders.
Hong Kong's outspoken Cardinal Joseph Zen accused the Vatican of "selling out" by endorsing government appointed bishops and called the deal "a major step toward the annihilation of the real Church in China".
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