Brightly coloured balloons with hundreds of homemade fireworks woven into their frames were sent soaring into the night sky, showering down cascades of sparks onto adoring crowds.
The explosive-laden balloons regularly crash to the ground, causing panic below, but visitors say the sight is worth the risks.
"I'm very happy and also afraid," 22-year-old Maung Maung Myint, who travelled to the capital of Shan state from Mandalay, told AFP on Friday night.
"It's scary when the fireworks fly right at me," he added.
The November celebration has become a highlight of the annual Tazaungdaing festival of light that marks the end of Myanmar's rainy season.
While the tradition is rooted in Buddhism, the hot air balloon contest itself was started by British colonialists in the late 19th century.
Visitors from around the world flock to see the extraordinary explosions of light and colour, which police predicted would draw up to 50,000 visitors a day this year.
"I've never seen so many people. It's absolutely crazy, but everyone is having a good time," said Mark Boyd, 41, from Britain's Isle of Man.
"It wouldn't be allowed in my country. They were dangerous but it was great."
The huge crowds, lack of safety precautions and homemade fireworks have proved deadly in the past.
In 2014, three people were killed when a balloon crashed onto spectators below. A young child also died when a balloon was blown into the family's tent.
And it is not only balloons that set pulses racing. Visitors can also witness more death-defying feats on a human-powered ferris wheel at the festival's fairground.
Workers scamper across the 50-foot high rickety structure like spider monkeys, using their body weight to send it spinning around at extraordinary speed.
Some dangle from the bars as the ride hurtles toward the ground, while others swing between the bars upside down as the wheel turns.
But for the balloon makers, who see months of painstaking work disappear in minutes, the competition is serious business as they battle to create the most brilliant spectacle of light.
"Before last year I had won every time. Even so I have never got less than third," said Thaw Thar Win, who led a group of balloon makers.
"It's not difficult because I am working with a team."
