The Nechalacho rare metal deposit, and in particular its heavy rare earth element (HREE)-enriched Basal zone, constitute a world-class resource of REEs, zirconium, and niobium. The deposit formed by magmatic accumulation and interstitial crystallization of eudialyte in the upper part of a 2176 Ma layered agpaitic nepheline syenite intrusion. Its endowment in HREEs compared to later-crystallized units in the intrusion is a result of emplacement-level fractionation combined with the compatibility of HREEs in the eudialyte deposited in the Basal zone. Despite the enrichment of REEs, Nb, and Zr by igneous processes and evidence for the immobility of these elements in the Basal zone, hydrothermal alteration had a major impact on the mineralogy of the deposit: eudialyte was completely replaced by a quasi-miaskitic hydrothermal assemblage consisting of REE-Nb-enriched zircon and secondary REE and Nb minerals, mainly fergusonite-(Y) and bastnäsite-(Ce). The host aegirine-nepheline syenite was metasomatically altered to a biotite + quartz + magnetite ± ankerite ± fluorite assemblage. Sodium was lost in large proportions during the alteration, and substantial amounts of Mg were introduced. Mineral equilibria calculated for the hydrothermal conditions (300°C and 4 kbar) indicate that the fluid was mildly reducing (fo2 was 2.0–3.6 log units above the quartz-fayalite-magnetite buffer) and that pH was moderately acidic to mildly alkaline (between 3.7 and 5.7). It is likely that the hydrothermal fluid was initially acidic and neutralized upon reaction with the nepheline syenites. In contrast, the pH for magmatic fluids in equilibrium with fresh nepheline syenite was alkaline, owing to the reaction of nepheline to analcime. Hence, we conclude that the acidic, Mg-bearing hydrothermal fluid responsible for the in situ replacement of eudialyte and alteration of the host syenites was externally derived, likely a crustal fluid introduced during a 1871 to 1835 Ma, regionally pervasive hydrothermal event. The identity and composition of the secondary REE-Nb minerals that now make up the mineral resource were controlled by the original composition of eudialyte and the fluids.