The analysis of ‘mélanges’ of various types (sedimentary, diapiric, tectonic and polygenetic) is generally difficult and depends on a variety of criteria. However, understanding the nature and origin of mélanges is crucial to deciphering the evolution of some mountain belts. The Lichi Mélange of the Taiwan Coastal Range is juxtaposed against remnant forearc basin sequences by thrust faults and is composed of exotic ophiolite and sedimentary blocks, with sizes ranging from metres to kilometres, and coherent turbidite beds, all embedded in a sheared scaly argillaceous matrix. The Lichi Mélange has been interpreted either as a subduction complex, or as an olistostrome. By separating four main deformation levels based on the degree of disruption within the Lichi Mélange and adjacent sedimentary rocks, we have made new detailed geological maps and structural profiles in two key areas of the Lichi Mélange. We paid particular attention to the original stratigraphic relationships between the mélange and the adjacent flysch formation. Our field results compared with submarine seismic profiles suggest that the present-day structure of the Lichi Mélange results mainly from the shearing of lower forearc basin sequences, rather than from a subduction complex or a mere olistostrome. In Late Miocene time, because lithospheric subduction turned into arc–continent collision in the southern Taiwan area, the site of the proto-Manila trench changed from an active plate boundary into a deformation zone with several thrusts. A new plate suture zone between the Eurasian plate (eastern Central Range) and the Philippine Sea plate (Coastal Range) was therefore formed along the Longitudinal Valley. The Longitudinal Valley originated as a submarine arc–prism boundary, an innate weak zone within the overriding plate, and has become a prominent tectonic feature of the arc–continent collision. This inference is supported by observations on the Lichi Mélange in the Coastal Range and the Huatung Ridge off southeastern Taiwan.