The community dialogue, which took place in the evening in a large stadium on Hong Kong Island, was attended by about 130 Hong Kong citizens, who posed questions to Lam and her four Ministers on stage.
The 62-year-old leader and her colleagues faced an audience voicing its dissatisfaction over her administration's handling of the ongoing anti-government protest movement that erupted in June.
The city's police force was among the main subjects of criticism, according to Efe news.
Roughly 80 per cent of the participants in the two-hour-long event, who were picked randomly to raise questions, were critical of the Hong Kong authorities.
Among the askers, each was given three minutes to speak, there were repeated calls for the authorities to set up an independent body probing events surrounding the ongoing anti-government protest movement, especially alleged police brutality.
A bank worker, one of the members of the audience invited to speak, said: "What is heartbreaking for me is not how protesters have damaged some infrastructure facilities, but the fact that the police have inverted right and wrong ( ) Today our young people have come out for the sake of democracy and their society, but they have to pay a high price."
A female questioner gave Lam an uncensored piece of her mind, telling the leader to step down because she "holds the biggest responsibility" for what has happened in Hong Kong in recent months.
Addressing the citizens' concerns, Lam said she was aware people had lost trust in her and the police, and that she hoped continuous community dialogue would lead to a way out of the impasse.
On people's calls for an independent inquiry, Lam said she had taken note of people's voices and that her government "have the resolve to address people's demands."
"The only difference between us is about what measure to take (to deal with complaints against the police).
"We have increased transparency and invited overseas experts to join the existing mechanism for police complaints."
In her opening speech, a smiling Lam said: "The dialogue is not a public relations move. It is about seeking changes, making Hong Kong, the city that we love, a better place.
"Perhaps it will take time, but we have to start it."
The event marked the first time Lam engaged directly with members of the public in Hong Kong since the mass protest movement triggered by a controversial extradition bill began over 100 days ago.
Over 20,000 Hong Kong citizens had signed up for the event but the maximum number of participants was kept at 150 in the 2,000-seater stadium.
( With inputs from IANS )