Seasonal influenza A virus subtype H3N2 (A/H3N2) circulates globally and has been linked to higher hospitalization rates and summer outbreaks in temperate regions. Here, A/H3N2 circulation in Shanghai, China was systematically studied using data and materials generated by the Shanghai influenza surveillance network from 2005 to 2023. Time-series analysis of incidence and subtyping data showed that A/H3N2 co-circulated with other (sub)types and dominated in multiple seasonal influenza peaks, preferentially in summer. Whole genomes of 528 representative strains were sequenced, and spatiotemporal phylodynamic analysis using these and GISAID-archived sequences demonstrated that in the years before the COVID-19 pandemic, phylogenetically similar strains were circulating locally and elsewhere. However, clade 1a.1 (within 3C.2a.1b.2a), circulated in and only in Shanghai and domestically in 2022, while the sibling clade 2 predominated in other regions. Interestingly, clade 1a.1 was swiftly and completely replaced by clade 2, mostly 2a.3a.1, at the start of 2023. In hemagglutination inhibition and neutralization assays, sera from healthy donors collected in 2022 displayed higher or similar reactivity against 2a.3a.1 compared to 1a.1. By contrast, transcription and replication competence of 2a.3a.1 in MDCK cells was higher than 1a.1. These results indicated that instead of antigenicity differences enabling evasion of pre-existing immunity, higher replicative capability more likely contributed to 2a.3a.1 viruses achieving dominance in China. In addition to summarizing patterns of A/H3N2 local circulation in Shanghai, this work revealed an unusual episode in A/H3N2 global circulation and evolution dynamics in connection to the COVID-19 pandemic and explored possible mechanistic explanations.