The Tianshuihai terrane, located in the northwest of the Tibetan plateau, is a newly known metallogenic district of Pb-Zn deposits in China, with a prospective resource of Pb and Zn over 30 Mt. Lead and Zn mineralization in the terrane comprises two types of non-sulfide and sulfide. However, the genesis of sulfide Pb-Zn mineralization and its relationship to regional geological evolution remain enigmatic. In this paper, a detailed mineralogical and geochemical study of the Huoshaoyun Pb-Zn deposit combine with a synthesized review of the evolution of the Tianshuihai terrane provide comprehensive constraints on the genesis of sulfide Pb-Zn mineralization and what geological events of which it may have been part. Economic orebodies in the Huoshaoyun deposit are hosted by a sequence of unmetamorphosed, flat-lying carbonate complex of Middle Jurassic age. Ore minerals consist predominantly of smithsonite and cerussite with variable sphalerite and galena. The sulfide minerals are texturally early and were replaced by non-sulfide minerals. Sulfur isotope compositions of galena are remarkably inhomogeneous, range from −18.52 to 25.40 ‰. Conversely, lead isotope compositions of galena display fairly uniform 206Pb/204Pb (18.485–18.785), 207Pb/204Pb (15.640–15.764), and 208Pb/204Pb (38.781–39.303) ratios. We thus propose that sulfide Pb-Zn mineralization in the Huoshaoyun deposit belongs to Mississippi Valley (MVT) - type. The metals were most probably sourced from the regional strata, e.g., the Permian Shenxianwan, Triassic Keleqinghe, and Jurassic Longshan formations. Sulfide Pb-Zn mineralization in the Tianshuihai terrane likely occurred sometime between the Oligocene to Early Miocene in a paleo-forland basin, coincided with the widespread potassic and ultra-potassic magmatic activities, a marked change in tectonic regime from compressional to extensional, an elevated heat flow in the Tibetan Plateau, and a great MVT-type Pb-Zn mineralization event in the Tethys tectonic domain. This study raises awareness about the presence of MVT-type Pb-Zn deposits in the Tianshuihai terrane and the great potential for Pb-Zn exploration in this region.