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In the Upper Ediacaran Dengying Formation of the Sichuan Basin, the presence of abundant, well-preserved microbial carbonates provides a unique opportunity to study Precambrian paleoceanography and microbial carbonate origins. Particularly, the underexplored coated grain dolostones of this formation, characterized by distinct microbially induced fabrics and intragranular dissolution, offer crucial insights for understanding late Ediacaran microbial mineralization and diagenetic sequences. Utilizing selected typical samples, we conducted detailed petrographic and geochemical analyses, revealing a dynamic interplay between microbial processes and sedimentary dynamics. We observe the coexistence of constructive micrite envelopes with microbially induced fabrics such as clots and laminations, highlighting microbial biomineralization's key role in fabric formation. The sedimentary dynamics critically determines the formation processes of the coated grains: low-energy settings foster grain agglomeration and consolidation through clot precipitation between grains, while high-energy settings favor smaller grains binding to microbial mats. Geochemically, micrite envelopes play an essential role in preserving distinct rare earth element (REE) signatures. The weak negative Ce anomalies and positive Eu anomalies within these envelopes point to a suboxic to anoxic depositional environment, directly indicative of the microenvironmental conditions conducive to microbial mineralization processes. Furthermore, our study sheds light on the structural evolution of coated grains with hollow nuclei, proposing that their internal pore formations are influenced by both mineral instability and selective dissolution by meteoric freshwater. These findings not only provide fresh insights into complex diagenetic processes in the Dengying Formation but also substantially advance our understanding of early microbial life and environmental adaptations during the Precambrian. • Revealed the relationship between micrite envelopes and microbially induced fabrics • Proposed a novel formation mechanism for coated grain dolostone in the Dengying Fm. • Investigated the diverse environmental responses of microbiolite fabrics • Established micrite envelopes as dependable records of seawater REE compositions [ABSTRACT FROM AUTHOR]