The Ailao Shan - Red River shear zone is generally considered as a transtensional shear zone accommodating eastward extrusion and rotation of the Indochina block relative to the Yangtze block during middle Tertiary time, and eastward extrusion of the Yangtze block relative to the Indochina block during late Tertiary time. Associated with these deformations was significant normal faulting along the northeast side of the Ailao Shan. However, neither the evidence for normal faulting nor its special and temporal correlation is clear. Our structural and sedimentological studies, together with existing thermochronological data from the Ailao Shan, suggest that rang ¨Cfront fault of the northwest part of the Ailao Shan define a listric normal fault that is linked with the Quaternary right-lateral movement along the Red River fault. From the Yuanjiang basin southeastward, the northeast side of the southeast part of the Ailao Shan is also marked by a northeast dipping normal fault, along which the downward movement of its hanging wall resulted in the tractional bending of the mylonite foliation in its foot wall contemporaneously with sedimentation in its hanging wall. Normal faulting is interpreted to have occurred on this southeastern part of the Ailao Shan during late Oligocene-early Miocene time based on syntectonic sedimentation. To the northwest, this normal fault is truncated by a Quaternary normal fault south of the Yuanjiang basin. Middle Tertiary contemporaneous thrust faulting along the southern boundary of the Ailao Shan suggests that the metamorphic rocks of the Ailao Shan may have undergone subvertical extrusion relative to the Yangtze and Indochina blocks.