The drill included a bomb attack followed by armed gunmen at the city's fan zone where supporters will gather to watch matches live on a big screen.
Special forces secured the venue before emergency response teams treated the critically injured.
The mock terror attack came as British fans travelling to Euro 2016 were warned to remain "vigilant at all times" amid the heightened threat by ISIS terrorists.
The Foreign and Commonwealth Office yesterday updated its advice to travellers - aimed at supporters of the England, Wales and Northern Ireland teams.
It specifically highlights several types of location as potential targets for atrocities, including: stadiums, fan zones, other venues broadcasting the tournament and transport hubs and links.
French police spokesman Michel Delpuech said: "The goal (of this exercise) is for police forces on the one hand, and for rescue services on the other hand - like firemen - to train and practice very professional gestures and sequences.
"The goal is not to do something spectacular or to demonstrate something, it is really to lap teams to very professional gestures, and sequences.
"Are we prepared? Well, I think this is exactly what we are showing tonight in Lyon, as well as in other big French cities.
"Yes, we are prepared, and as we have been preparing ourselves, as we are being vigilant, and as we are and remain lucid, we are serene, and as we are serene, the celebration will go on without any incident."
British journalist Gavin Lee, who attended the exercise, said the show would reassure fans coming from abroad that security at the venues was taken seriously.
He told Reuters: "There are about half a million football fans from the UK (United Kingdom) who will be coming to France. One of the things that certainly is in the back of people's heads right now is how safe is it to be here.
"So for us to see one of the exercise's taking place, to see how the police, special forces, security services can cope with their responsive levels is something actually people want to see. And also people want to be reassured by if they are coming here as they are in huge numbers."
Lyon is set to host four group matches including Italy's clash with Belgium and Portugal's match against Hungary, as well as a round of 16 game and a semi-final.