High-magnesian calcite (HMC) peloidal micrite is a ubiquitous synsedimentary cement observed in abundance in the Holocene cryptic niches of coral intraskeletal pores and borings at Zhongsha Atoll in the South China Sea. In this study, we assessed the petrographic and geochemical effects of these intraclasts during early diagenesis. Peloidal micrites with an average diameter of 20–40 μm were composed of radially arranged rhombic micro-crystals of HMC (∼20 mol% MgCO3) and massive micritic nuclei. Some living bacterial/algal clumps in peloidal micrites are associated with bioluminescence and manifest an organic-rich micro-environments. Fragmented calcified cyanobacterial sheaths, which are components of the peloidal nuclei, further enhance biogenetic carbonate precipitation throughout peloidal micrite formation. The stable isotope characteristics of the peloidal microfabrics (average δ13C of 2.55 ± 0.15‰ and δ18O of −1.64 ± 0.25‰) suggest that photosynthesis and heterotrophic decomposition promoted peloidal micrite precipitation by increasing the carbonate saturation. Plentiful peloidal micrites within the intraskeletal pores also influenced the geochemical signatures of the bulk reef limestone. Owing to the presence of mixed HMC peloidal micrites, the δ13C and δ18O values of the bulk limestone (0.26 ± 1.04 and-3.82 ± 1.02‰, respectively) were elevated and fluctuated widely compared with pristine coral skeletons (−3.43 ± 0.48‰ and − 5.75 ± 0.278‰, respectively). Enriched Mn and depleted Sr contents led to an increase in the Mn/Sr diagenetic proxy. The co-occurrence of HMC peloidal micrites and elevated Mg/Ca, Mn/Sr, δ13C, and δ18O ratios indicate that the HMC peloidal micrites played an essential role in these geochemical variations. We, therefore, propose performing a comprehensive diagenetic evaluation before geochemical analyses of reef limestone. In such cases, selective micro-analysis of pristine areas in altered limestone would yield more robust reconstructions based on corals.