Left-lateral movement of the Ailao Shan–Red River shear zone lends support to the hypothesis of continental extrusion resulting from the collision of India with Asia. Our new observations from northwestern Yunnan, China, and northwestern Vietnam on different sides of the shear zone demonstrate that the sinistral offset was ∼600 km according to correlations of Permian-Triassic flood basalt successions and late Paleogene highly potassic mafic magmas. We conclude that the shear was propagating on the South China continental margin and does not correspond to a suture between South China and Indochina. Furthermore, the highly potassic magmas were emplaced from ca. 40 to 30 Ma, before the shear movement, which was caused by the late Oligocene to early Miocene (ca. 27–22 Ma) extrusion activity. This suggests that a late Eocene to early Oligocene intraplate extension, possibly induced by delamination of thickened continental lithosphere, took place in northwestern Yunnan (or eastern Tibet) as a response to the India-Asia collision. This extension, and sea-floor spreading of the South China Sea that began ca. 30 Ma, could have accounted for the initiation of the Ailao Shan–Red River shear zone.