Juster put pictures of his declaring the festival open and participation in the event on his Twitter account.
This time, China has not said anything yet to the US envoy's visit to Arunachal Pradesh, which it considers as part of South Tibet.
Two years ago, China had reacted sharply to then US Ambassador in India Richard Verma's visit to Arunachal Pradesh and warned that a third party's meddling would only complicate the dispute between Beijing and New Delhi.
India has told China that Arunachal Pradesh is an integral part of the country.
Juster's visit also comes days after India and China held their second informal summit in Mahabalipuram in Tamil Nadu between Prime Minister Narendra Modi and Chinese President Xi Jinping.
Juster is on a three day trip to Arunachal to attend the Tawang Festival, which is organised by the state Department of Tourism.
Juster was joined by Pattie Hoffman - the US Consul General in Kolkata.
On Monday, Juster said that more health centres in the state would be upgraded with modern technologies so that proper and good health services are provided to the people.
He said the US has modernised hospitals and health facility centres in Namsai and Pasighat. He also extended his gratitude to the local people for the exceptional hospitality offered to him and his entourage, saying he was mesmerised by the colourful people, their dresses, customs and traditions.
Juster said the University of Florida has collaborated with Arunachal Pradesh's lone central university, the Rajiv Gandhi University, for combined research work.
Chief Minister Pema Khandu said the state was fortunate to host two US Ambassadors to India in a span of three years. He briefed the visiting dignitaries about the strengths, challenges and opportunities of the state.
( With inputs from IANS )