The ordination of the new Chinese bishop, which was witnessed by a Reuters reporter, took place under heavy security at the cathedral in the southwestern city of Chengdu.
It was cordoned off from the general public by dozens of police officers. About 200 people attended the ceremony.
Lei Shiyin, the government-backed bishop of Leshan in Sichuan province where Chengdu is also located, was ordained in China in June 2011 without Rome's blessing, at a time of heightened tensions between the Vatican and Beijing.
He was excommunicated by the Vatican for accepting an appointment to become a bishop without papal approval, the harshest punishment that can be imposed on a Catholic and which involves exclusion from sacraments.
Under Catholic church law, excommunicated clergy cannot actively participate in liturgical acts such as an ordination.
The Vatican did not have any immediate comment on the ceremony.
Lei could not be reached for comment.
The Chinese Catholic Patriotic Association, a Communist Party-controlled body that governs the Catholic community in China and is not recognised by the Vatican, declined to comment on Thursday.
ORDINATION A STUMBLING BLOCK
After several rounds of secret talks, Vatican delegates and Chinese government officials have hammered out a draft agreement on how to select and appoint new bishops in China, Reuters reported earlier this year.
Vatican officials had been hoping to sign a deal as early as this year in an effort to unite Chinese Catholics, split between a church that functions openly and is controlled by the party and an underground church that swears allegiance solely to the pope.
The direct involvement of Lei in the ordination in Chengdu could be seen by the Vatican as an act of defiance and risks derailing the talks, experts said.
Lei took an active part in the ordination ceremony, circling the new bishop, Tang Yuange, and holding his hand out over Tang's head. This is called the "laying of hands" and is one of the most sacred parts of the ordination ceremony.
"This will make a deal between China and the Vatican on appointment and ordination of future bishops more difficult," said Meixiu Wang, a Beijing-based Chinese scholar who focuses on Sino-Catholic relations.
Still, Francis Yan, a Rome-based Chinese Catholic researcher, said Rome's priority right now was to avoid further ordinations it considers illegitimate and that the "shadow of Chengdu can be overcome". He noted both sides were making an effort to increase the dialogue.
The selection and ordination of bishops is the focus of current talks between the two sides, which have been at odds since the expulsion of foreign missionaries from China after the Communists took power in 1949.
A resolution of the dispute over the ordination of bishops would lessen the possibility of a formal split within the Catholic Church in China, Vatican and Catholic sources say.
The Chinese Communist government says bishops have to be appointed by the local Chinese Catholic community and refuses to accept the authority of the pope, whom it sees as the head of a foreign state that has no right to meddle in Beijing's affairs.
"If Lei was there, this means the government still has the upper hand" on Catholic matters in China, said Rachel Zhu, a professor of religious studies at the Fudan University who focuses on Chinese Catholicism.
Reuters reported earlier this year that the pope was prepared to pardon eight Chinese bishops, whom the Vatican has not approved but who are Beijing-backed, provided they showed willingness to repent.
Of these eight, some of whom met Vatican delegates in Beijing in August, the pope is ready to recognise at least four, Reuters reported.
However, Lei is not in this group, Vatican and Catholic sources have said.