Melatonin’s capacity to improve cashmere production and quality in goats is well established, but its underlying mechanisms, particularly those concerning the gastrointestinal microbiome, remain inadequately understood. This study aims to elucidate the effects of melatonin implantation on the production performance, blood biochemical parameters, nutrient digestibility, and gastrointestinal microbiome of Liaoning cashmere goats. Thirty newborn Liaoning cashmere goat lambs were selected and randomly assigned to control and melatonin groups using a paired test design. The melatonin group received three melatonin implantations at 15, 75, and 135 days of age, respectively, with a dosage of 2 mg/kg body weight, while the control group received no treatment. Digestive metabolism tests were conducted at 150 and 300 days of age; prior to these tests, blood, rumen fluid, and rectal feces were collected. Apparent nutrient digestibility and blood biochemical indexes were determined, and rumen fluid and rectal feces were analyzed using microbial 16S rRNA sequencing. The results indicated that melatonin significantly reduced daily weight gain and body weight at 60 days (p < 0.05) while significantly increasing daily weight gain at 300 days (p < 0.05). Additionally, it significantly increased cashmere length and reduced its fineness (p < 0.05). Melatonin significantly enhanced nitrogen deposition (p < 0.05), elevated plasma levels of T-AOC, CAT, GSH-PX, and BUN (p < 0.05), and reduced plasma levels of MDA, GOT, GPT, and AKP (p < 0.05). Moreover, melatonin significantly elevated the microbial Ace and Chao1 indices in rectal feces (p < 0.05), increasing genera beneficial for feed digestion and absorption, including Prevotella, Lachnospiraceae, Ruminococcus, and Synergistaceae (p < 0.05); the abundance of these beneficial genera were positively correlated with improved cashmere production performance, antioxidant activity, and liver and kidney function. In conclusion, melatonin enhances cashmere production by modulating gastrointestinal microbiota, antioxidant activity, liver and kidney function, and nitrogen metabolism in cashmere goats. This study provides a theoretical foundation for melatonin’s role in microbiota modulation, which is essential for promoting high-quality and sustainable development in the cashmere goat industry.