The Yulong porphyry Cu (Au) deposit occurs on the eastern margin of the Tibetan plateau and is one of the largest porphyry Cu (Au) deposits in China, containing more than 6 million tons of Cu metal. Similar to other porphyry Cu deposits in the world, the Yulong porphyry is highly oxidized. Sulfate is the dominant sulfur species in fluid inclusions hosted by magmatic quartz phenocrysts, and no sulfide is observed, indicating an oxygen fugacity above the SSO buffer during magmatic processes. The sulfur species changed from sulfate dominant during magmatic processes to sulfide dominant during the main mineralization processes, with sulfate and sulfide mineral assemblages observed in fluid inclusions in mineralized quartz veinlets and only sulfides in the orebodies, corresponding to a decrease in redox potential from the porphyry to the hydrothermal fluid. Magnetite crystallization was coincident with the onset of major sulfate reduction, indicating that magnetite isolated trivalent iron, reducing sulfate, and consequently leading to the formation of porphyry Cu-Au mineralization. Most porphyry Cu-Au ore deposits are spatially associated with, and genetically related to, oxidized felsic magmas. Our results indicate that sulfate reduction promoted by magnetite crystallization is essential for the final precipitation of Cu-Au–bearing sulfides, i.e., decreasing redox potential of the fluid is the key to, and direct cause of, ore formation in Yulong. Initial high redox potential is a prerequisite for and may be an indirect indicator of most mineralization of this kind, because it enables efficient transportation of Cu-Au. Redox potential fluctuations can be well preserved in zircon, a resistant accessory mineral commonly found in porphyries, which might be developed as a handy and reliable exploration tool for porphyry Cu deposits associated with magnetite.