The timing of onset of deposition of the Lulehe Formation is a significant factor in understanding the genesis of the Qaidam basin and the evolution of the Tibetan Plateau. Here, we describe a detailed magnetostratigraphic and magnetic fabric study of the middle and lower parts of the Lulehe Formation. A total of 234 samples were collected from 117 sites throughout a thickness of almost 460 m of fluvial and lacustrine deposits at the Xitieshan section in the northeastern Qaidam basin. Out of these sites, 94 sites yielded well-defined characteristic remanent magnetization components by stepwise thermal demagnetization and were used to establish the magnetostratigraphy of the studied section. Based on correlation with the geomagnetic polarity timescale, the studied section spans the period from 53.8 Ma to 50.7 Ma. Our results show a three-fold decrease in sedimentation rates as well as marked change in facies from braided river to delta and shore–shallow lake around 52.6 Ma, which suggests tectonic uplift of the northeastern Qaidam basin margin ridge was rapid at the onset of formation of the Qaidam basin and subsequently weakened after 52.6 Ma. The anisotropy of magnetic susceptibility results indicate that tectonic compression stress had reached the northeastern Tibetan Plateau by the early stages of Indo–Eurasian plate collision and that the direction of stress in the study area was NE–SW. Furthermore, a weakening of tectonic compression stress around 52.6 Ma is consistent with sedimentary records. The age of initial deposition of the Qaidam basin (around 53.8 Ma) was almost synchronous with that of the Qiangtang, Hoh Xil, Xining, and Lanzhou basins, which implies that stress was transferred rapidly through the Tibetan Plateau during or immediately after the onset of Indo–Eurasian collision.