Melting of subducted sediment remains controversial, as direct observation of sediment melt generation at mantle depths is not possible. Geochemical fingerprints provide indirect evidence for subduction delivery of sediment to the mantle; however, sediment abundance in mantle-derived melt is generally low (0%–2%), and difficult to detect. Here we provide evidence for melting of subducted sediment in granite sampled from an exhumed mantle section. Peraluminous granite dikes that intrude peridotite in the Oman–United Arab Emirates ophiolite have U-Pb ages of 99.8 ± 3.3 Ma that predate obduction. The dikes have unusually high oxygen isotope (δ18O) values for whole rock (14–23‰) and quartz (20–22‰), and yield the highest δ18O zircon values known (14–28‰; values relative to Vienna standard mean ocean water [VSMOW]). The extremely high oxygen isotope ratios uniquely identify the melt source as high-δ18O marine sediment (pelitic and/or siliciceous mud), as no other source could produce granite with such anomalously high δ18O. Formation of high-δ18O sediment-derived (S-type) granite within peridotite requires subduction of sediment to the mantle, where it melted and intruded overlying mantle wedge. The granite suite described here contains the highest oxygen isotope ratios reported for igneous rocks, yet intruded mantle peridotite below the Mohorovičić seismic discontinuity, the most primitive oxygen isotope reservoir in the silicate Earth. Identifying the presence and quantifying the extent of sediment melting within the mantle has important implications for understanding subduction recycling of supracrustal material and effects on mantle heterogeneity over time.