The interaction of hydrous fluids and melts with dry rocks of the lithospheric mantle inevitably modifies their viscoelastic and chemical properties due to the formation of compositionally distinct secondary phases. In addition, melt percolation and the associated metasomatic alteration of mantle rocks may also facilitate modification of the pre–existing rock texture and olivine crystallographic preferred orientation (CPO) and thus seismic properties. Here we explore the relationship between mantle metasomatism, deformation and seismic anisotropy using subduction–related mantle xenoliths from the Penghu Islands, western Taiwan. The investigated xenoliths have equilibrated at upper lithospheric mantle conditions (879 °C to 1127 °C) based on pyroxene geothermometry and show distinct variations in clinopyroxene chemical composition, texture and olivine CPO allowing for the classification of two distinct groups. Group 1 xenoliths contain rare earth element (REE) depleted clinopyroxene, show a porphyroclastic texture and olivine grains are mostly characterized by [100]–axial pattern symmetries. In contrast, REE-enriched clinopyroxene from Group 2 xenoliths occur in a fine–grained equigranular texture and coexisting olivine frequently displays [010]–axial pattern symmetries. The clinopyroxene compositions are indicative of cryptic and modal to stealth metasomatic alteration of Group 1 and Group 2 xenoliths, respectively. Furthermore, the observed olivine [100]–axial pattern of Group 1 xenoliths reflects deformation by dislocation creep at high temperature, low pressure and dry conditions, whereas olivine [010]–axial patterns of Group 2 xenoliths imply activation of olivine [001] glide planes along preferentially wet (010) grain boundaries. This correlation indicates that the variation in olivine CPO symmetry from [100]– to [010]–axial pattern in Penghu xenoliths results from deformation and intra-crystalline recovery by subgrain rotation during metasomatic alteration induced by melt percolation. The microstructural observations and olivine CPO combined with petrological and geochemical data suggest that Group 1 xenoliths preserve microstructural and chemical characteristics of an old, probably Proterozoic lithosphere, while Group 2 xenoliths record localized Miocene deformation associated with wall–rock heating and metasomatism related to melt circulation. Furthermore, the observed transition of olivine CPO from [100]–axial pattern to [010]–axial pattern by deformation in the presence of variable melt fractions and associated metasomatic alteration can be inferred to modify the physical properties of mantle rocks.