The Luoping Biota represents of the recovery of marine ecosystems after the Permian-Triassic Mass Extinction. To better understand the palaeoenvironmental background of the Luoping Biota, sedimentary analysis and multi-geochemical proxies (Mo, U, V, V/Cr, Mo-EF, U-EF, and V-EF) were assessed in Member II of the Middle Triassic Guanling Formation of the Xiangdongpo section in Luoping County, Yunnan Province. According to the facies characteristics and redox-sensitive elemental proxies, in combination with macrofossil and bioturbation evidence, five intervals (I, II, III, IV, and V) were recognized. The exceptional preservation of the fossils is related to two anoxic intervals (II and IV) sandwiched by three suboxic intervals (I, III, and V). Based on this study and regional correlation, it is concluded that anoxia in the water-column increased the preservation potential of macrofauna fossils and inhibited the survival of trace-making organisms. In addition, microbial mats could produce local anoxic and restricted micro-environments, preventing the disarticulation of the carcasses by water turbulence. Therefore, we demonstrate that anoxic conditions played a key role in the exceptional fossil preservation of the Luoping Biota.