Granitoids with diverse composition and tectonic settings provide important tools for exploring crustal evolution and regional geodynamic history. Here we present an integrated study using petrological, mineralogical, zircon U-Pb geochronological, whole-rock geochemical, and isotopic data on the Late Triassic Daocheng batholith in the Yidun Terrane with a view to understanding the petrogenesis of a compositionally diverse batholith and its implications for the evolution of the Paleo-Tethys Ocean in the eastern Tibetan Plateau. The different lithological units of the batholith, including granodiorite, monzogranite, and quartz diorite, with abundant mafic microgranular enclaves in the granodiorite (MME I) and monzogranite (MME II), show identical crystallization ages of 218–215 Ma. The mineral assemblage and chemical composition of the granodiorite are identical to those of tonalitic-granodioritic melts generated under water-unsaturated conditions. The insignificant Eu anomalies and low magmatic temperatures indicate hydrous melting in the source. The relatively narrow range of whole-rock chemical and Sr-Nd isotopes, as well as the zircon trace element and Hf isotopic compositions of the granodiorite, suggest a homogeneous crustal source for the magma. Our modeling suggests that the rock was produced by 20–50% of lower crustal melting. The Daocheng monzogranites display more evolved compositions and larger variations in Sr-Nd-Hf isotopes than the granodiorite, which are attributed to assimilation and the fractional crystallization process. This is evidenced by the presence of metasedimentary enclave and inherited zircon grains with Neoproterozoic and Paleozoic ages, a non-cotectic trend in composition, and the trend shown by the modeling of initial 87Sr/86Sr ratios and Sr. The quartz diorites and MMEs showing composition similar to that of andesitic primary magma have high zircon εHf(t) values and are characterized by enrichment in LILEs and depletion of HFSEs. They were derived from the partial melting of lithospheric mantle that had been metasomatized by slab melts and fluids. The MMEs in both rocks display typical igneous texture and higher rare earth element (REE) and incompatible element concentrations than their host granites. The presence of fine-grained margins, acicular apatite, and plagioclase megacrysts suggests a magma mingling process. The overgrowth of amphibole around the pyroxene, quartz ocelli rimmed by biotite, and oscillatory zones of plagioclase are all indicative of chemical diffusion. Their enriched Sr-Nd isotopes imply isotopic equilibrium with the host granites. Based on a comparison with the coeval subduction-related magmatism, we propose that subduction and subsequent rollback of the Paleo-Tethys (Garzê-Litang Ocean) oceanic slab was the possible mechanism that triggered the diverse Triassic magmatism within the eastern Tibetan Plateau.