The Xiazha Formation recently identified in the Yarlung-Zangbo suture zone of southern Tibet has been considered as crucial evidence for early (pre-Cretaceous) subduction of Neo-Tethyan oceanic lithosphere. In this study, we carried out an integrated stratigraphic, petrographic, and geochemical study of the Xiazha Formation, which consists of abyssal chert, siliceous mudrocks, and calcareous turbidites deposited onto basaltic basement. Basalt geochemistry indicates alkali to tholeiitic magmas generated in a within-plate oceanic setting. The siliciclastic fraction contained in calcareous turbidites consists of plagioclase and mafic-rock fragments derived from the underlying basalts, and includes Cr-spinel grains with relatively high TiO2 and moderate Al2O3 concentrations pointing to an OIB source. Based on these data, and virtual lack of detritus of continental origin, we infer that the Xiazha Formation was deposited in oceanic island/plateau within the Neo-Tethyan domain. Its stratigraphy records an evolution from basaltic eruptions to the development of a carbonate platform surrounding the basaltic island, and finally to drowning of the atoll. The Xiazha Formation was not deposited in a subduction-related basin and, therefore, cannot be used as evidence for pre-Cretaceous initiation of the Yarlung subduction zone.