Our understanding of the processes involved in the Indo-Asian collision and the construction of the Tibetan Plateau are, in part, predicated on our understanding of the tectonic setting and crustal conditions of southern Tibet in the time period immediately preceding the Indo-Asian collision (Late Cretaceous). Several hypotheses have been proposed that describe the middle to Late Cretaceous tectonic and paleogeographic evolution of southern Tibet, each with different implications for when and how the Tibetan Plateau was uplifted. We examined the mid-upper Cretaceous Takena Formation of the Lhasa terrane in southern Tibet in order to reconstruct the middle to Late Cretaceous tectono-sedimentary history of this area and test the competing tectonic hypotheses. The Takena Formation consists of >2 km of sedimentary strata that include a lower marine limestone member (Penbo Member) and an upper member of clastic red beds (Lhunzhub Member). The Aptian-Albian Penbo Member consists of ∼250 m of orbitolinid-limestone beds that were deposited in a shallow-marine seaway during a time when there was little regional subsidence. The overlying Lhunzhub Member (>1500 m) consists primarily of fluvial strata that were deposited during a period of increased subsidence. Overall, the Lhunzhub Member coarsens upward from meandering and anastomosing stream deposits interbedded with numerous paleosols near the base, to multistory-multilateral braided stream deposits near the top. The fluvial sandstone units are lithic-rich and contain abundant plagioclase and volcanic grains, and paleo-current data record northwest-directed transport; these data indicate that the sediment was derived from the Gangdese volcanic arc that developed along the southern margin of the Lhasa terrane. Following deposition, but prior to ca. 70 Ma, the beds of the Takena Formation were folded and partially eroded. The sedimentary and stratigraphic characteristics of the Takena Formation are most consistent with deposition in a retroarc foreland basin setting. The limestone beds of the Penbo Member were deposited in a shallow-marine seaway that was eventually infilled by clastic sediment derived principally from the Gangdese volcanic arc. The low subsidence rate recorded in the lowermost strata of the Takena Formation, including the Penbo Member and the paleosol-rich interval of the Lhunzhub Member, is interpreted to be associated with the passage of a flexural forebulge. The overlying, upward-coarsening fluvial strata were deposited in progressively more proximal locations within the foredeep of a foreland basin. The Late Cretaceous folding of the Takena Formation indicates that the foreland basin strata were eventually incorporated into a fold-and-thrust belt. The upper Cretaceous sedimentary strata of the Lhasa terrane of southern Tibet predict that a north-verging fold-and-thrust belt existed along the southern margin of the Lhasa terrane during Late Cretaceous time, prior to the Indo-Asian collision. Collectively, the evidence indicates that the southern margin of the Lhasa terrane had thickened crust and was likely to have been at high elevations immediately before the Indo-Asian collision.