The rare earth elements and yttrium (REY) are enriched in marine sedimentary phosphorites, which are an important REY resource. The formation of marine REY-rich phosphorites is a product of sedimentary deposition, while some geochemical studies of phosphorites suggest that they also have the characteristics of hydrothermal deposition. Hydrothermal modification can have an important effect on the distribution of REY and REY minerals in phosphorites, although there is no direct mineralogical evidence for such hydrothermal activity. In this study, we used transmission electron microscopy and other microbeam techniques to investigate the hydrothermal activity during the formation of marine sedimentary phosphorites in the early Cambrian Gezhongwu Formation, Zhijin, South China. Geochemical and mineralogical evidence shows that late hydrothermal events occurred after formation of the marine sedimentary phosphorites. The observed micro-scale hydrothermal veins (e.g., barite), micro- and nano-scale hydrothermal minerals (e.g., anatase and fluorite), and hydrothermally transformed minerals (e.g., fluorapatite and zircon) provide direct mineralogical evidence of later hydrothermal activity. The hydrothermal fluid involved in the phosphorite deposition might have been a low-temperature reduced fluid, which was enriched in F, Ti. Moreover, the late hydrothermal activity changed the REY patterns of some minerals (e.g., fluorapatite and zircon) in the phosphorites, although the hydrothermal activity was not the main factor that controlled REY enrichment in the phosphorites. Our results not only provide direct evidence for hydrothermal transformation of marine sedimentary phosphorites, but also a possible explanation for the bell-shaped rare earth element patterns in apatite, suggesting that the apatite would not provide a reliable reconstruction of the paleo-ocean environmental conditions.