Previously called Victory Avenue, a common Soviet-era name, it is now called `Prospekt Putina`, or Putin Avenue, after the former president who since May has been prime minister.
Footage broadcast on Russian television showed bands of teenagers carrying the Chechen green, white and red flag along the avenue, which was lined with large portraits of Putin.
"This act is in recognition of Putin`s outstanding contribution to the fight against terrorism, and to the economic and social restoration in the Chechen republic," Grozny mayor Muslim Khuchiyev was quoted as saying by Interfax news agency.
Putin sent Russian soldiers into Chechnya in 1999 to seize control from separatists who had forced out Russia forces in an earlier war. The second Chechen war killed thousands, destroyed swathes of Grozny and created a new wave of refugees.
Rights groups accused Russian troops of using indiscriminate force in Chechnya but the second campaign was popular with voters angered by a series of attacks on civilians that were blamed on Chechen rebels.
