We propose that a mantle-peridotite-bearing mélange unit, which has been mapped for more than 400 km in southern Norway, represents vestiges of deep basin(s) formed by hyperextension of the Baltic margin during the inception of the Caledonian Wilson cycle. In the mélange, which occurs below the crystalline nappes of the Middle Allochthon in southern Norway, solitary mantle peridotites, detrital serpentinites, metabasalts, gabbros and deep basin sediments are interlayered and imbricated with allochthonous, coarse-grained siliclastic sediments and slivers of Proterozoic basement rocks. The siliciclastic sediments have detritus derived from Proterozoic rocks, similar to those of the large crystalline nappes and the autochthonous basement of Baltica. The mélange unit shares many similarities with the hyperextended Tethyan margin complexes that have been described from the Alps, the Pyrenees and several segments of the present-day passive ocean margins, and we interpret it to represent an ancient late Proterozoic to Palaeozoic analogue to present-day hyperextended passive margins. Regional maps show that the mélange continues into the central Scandinavian Caledonides and that this basin assemblage may have had a much wider geographical distribution. The new model suggests that a major reinterpretation of the Lower and Middle Allochthons of the Scandinavian Caledonides is required.