The stratigraphic record of the northern Indian margin documents tectonic extension and magmatic activity during the Late Triassic. The geodynamic process and the paleogeographic implications of this event remain, however, incompletely understood. This study presents new stratigraphic, petrographic, geochronologic and geochemical data from a mixed carbonate-clastic Upper Triassic succession of the Tethys Himalaya in southern Tibet (Tela Formation). The new finding of volcanic detritus with bimodal mafic/felsic composition in the Tela Formation indicates nearby volcanic activity constrained by detrital zircon UPb dating as latest Carnian to early Norian in age (229–223 Ma). The alkalic signature of mafic volcanic rock fragments, showing LREE enrichment and HREE depletion, indicates a within-plate extensional setting. The igneous activity in northeastern India compares with coeval volcanism in northwestern Australia, suggesting that a rift-related volcanic belt developed along the northern margin of eastern Gondwana in the Late Triassic. This volcanic belt controlled the accumulation of thick turbidites of the Langjiexue Group in northeastern India and induced accelerated tectonic subsidence and increased sedimentation rates all along the Tethys Himalayan zone as far west as the Zanskar-Spiti Synclinorium. This major rifting phase is suggested to have initiated a new phase of sea-floor spreading in the Neo-Tethys Ocean that torn off the Lhasa Block from eastern Gondwana.