Zircon U–Pb and Lu–Hf isotopic data along with whole-rock elemental and Sr–Nd isotopic analytical results for the Xin'anzhai and Tongtiange granitic plutons in the Ailaoshan suture zone record the transition from subduction to collision associated with the accretion of Indochina to Yangtze Blocks. The Xin'anzhai monzogranite yields zircon U–Pb age of 251.6 ± 2.0 Ma and εHf(t) values of − 6.2– − 9.8. The Tongtiange leucogranite gives zircon U–Pb age of 247.5 ± 2.2 Ma and εHf(t) values ranging from − 3.1 to − 11.1. The Tongtiange leucogranites have lower MgO, Na2O, CaO, FeOt and TiO2 contents but higher A/CNK values than those of the Xin'anzhai monzogranites. The εNd(t) values for Xin'anzhai and Tongtiange plutons are in the range of − 8.5 to − 8.8 and − 10.6 to − 11.4, respectively, similar to those of the Ailaoshan metamorphic basement. The Tongtiange leucogranites are the product of dehydration melting of mica-rich metasedimentary rocks whereas the primary source of the Xin'anzhai monzogranites is probably Proterozoic gneiss with an addition of 35–45% Proterozoic amphibolite. Our geochronological results, together with other published data, indicate the presence of Permo-Triassic magmatism associated with the Indosinian Orogeny along the Ailaoshan suture zone. This zone links with the Jinshajiang suture toward the northwest and the Song Ma–Hainan suture to the southeast. It is herein proposed that latest Permian convergent margin magmatism represented by the Xin'anzhai granitoid pluton (~ 252 Ma) terminated through the accretion of the Simao-Indochina to the South China Blocks, which marks the commencement of the Indosinian Orogeny resulting in the generation of the ~ 247 Ma Tongtiange S-type leucogranite.