We report geochemical data, SHRIMP zircon ages and Hf-in-zircon isotopic compositions for Cenozoic granitoids from major fault systems in the Tethyan belt in western Yunnan Province, southwestern China. Four magmatic pulses occurred in the Paleogene, namely at ca. 57 Ma, ca. 50 Ma, 45–40 Ma, and 38–34 Ma. Early magmatism of this episode (57–50 Ma) produced S-type granites whose zircons yielded εHf(t) values of ?5.0 to ?0.3. In contrast, late magmatism of this episode reflects heterogeneous sources. Zircons from a granite porphyry along the Ailaoshan-Red River fault system have slightly positive εHf(t) values suggesting derivation from relatively young crust and/or a juvenile source. However, zircons from a granite along the Gaoligong fault system have strongly negative εHf(t) values and suggest derivation from a Paleoproterozoic crustal source. The composition of the granitoids varies with age (from ca. 57 Ma to ca. 34 Ma) from peraluminous to metaluminous and also suggests a change from syn-collisional to late-orogenic tectonic setting. A new tectonic model, impacting lithospheric wedge (ILW) is shown for the origin of Paleogene granitoids in this paper.