The role of strike-slip faults, such as the Ailao Shan shear zone in southwestern China, in accommodating the India-Eurasia collision remains controversial. Cenozoic sedimentary rocks preserved along the northeast side of the Ailao Shan shear zone, however, record the nature and timing of exhumation of shear zone rocks. Field mapping shows that the lower strata consist of early Oligocene lacustrine red mudstone and gypsum and the upper of late Oligocene to Miocene fluvial conglomerate with rare, fine-grained, fossil leaf-bearing intervals. Sediment derived from shear zone gneiss is present only in the upper part of the section. Our observations indicate deformation began in Oligocene time, with the onset of rapid exhumation by early Miocene time, consistent with existing geochronologic results. Exhumation must have ended before the formation of a regional low-relief erosion surface and the onset of brittle deformation along the Red River fault, probably in early Pliocene time. Rapid exhumation of the Ailao Shan shear zone has been interpreted to have occurred in transtension, accommodated by a normal fault on the northeast margin of the shear zone. However, we observe consistent and pervasive shortening structures within the Cenozoic strata, including overthrusting and folding of the basin along faults defined by thick gouge zones within weak Cenozoic lithologies. Deformation is likely syndepositional. These structures are distinct from subvertical deformational features associated with the active Red River fault. Our field data thus support mid-Cenozoic transpressional exhumation of the Ailao Shan shear zone. This is consistent with regional evidence for widespread left-lateral and compressional deformation in the region to the east of the eastern Himalayan syntaxis during this time. Focused erosion along the Red River, established by late Oligocene time, may have contributed to deeper exhumation of the northeast part of the shear zone.