The Lychee and Dog Meat festival takes place annually in Guangxi province.
Earlier this year, US campaigners claimed that vendors had been told by authorities not to sell dog meat.
But stall holders had told the BBC they had heard nothing about this from officials. On 15 May, city officials confirmed there was no ban.
On Wednesday, reports from Yulin said dead dogs could be seen hanging from meat hooks at stalls in Dongkou market, the biggest in the city. There were also reports of a heavy police presence on the streets.
One activist in the city told the BBC she was prevented by police from entering the Dashichang market where she believed live dogs were on sale.
In previous years there have been scuffles between stall owners and activists trying to rescue the dogs slated for slaughter.
Eating dogs is not illegal in China but the festival draws international and domestic opposition each year.
Residents and vendors say the animals are killed in a humane way, but critics say the animals are transported from other cities in small, cramped cages ahead of the festival and brutally killed.
Activists allege many of the dogs are stolen pets.
The Yulin government has repeatedly said that it does not officially organise the festival so cannot prohibit it.
But in 2016, they banned the slaughter of dogs in public in anticipation of protests.
This year, reports said there was less public slaughtering taking place, though the scale of the event was not immediately clear.
Activists estimate that in peak years, about 10,000 dogs and cats were killed and eaten during the 10-day festival.
In Chinese culture dog meat is said to be beneficial to eat during the hot summer months.
The tradition of eating dog dates back some 500 years in China, South Korea and other countries, but the Yulin festival is only a few years old.