Although hyperextended rifted margins have been the focus of many recent studies, the potential interaction between tectonic deformation and sedimentation during extreme crustal thinning is poorly understood. In this study, we aim to explore the tectono-sedimentary evolution during final rifting and lithospheric breakup in the hyperextended Liwan sag basin. We demonstrate the presence of an oceanward inclined shale sequence, which acts as a decoupling level separating a subshale from a suprashale layer. The suprashale layer is characterized by progradational deltaic facies with a high sediment supply to the north and basal facies farther south. Extensional faults together with local gravitational structures are syndepositional and formed during hyperextension. The shale is observed to overlie a highly attenuated basement comprising high-reflective sequences that may correspond to meta-sediments. We propose a new model to explain the interaction of tectonic deformation, gravity sliding, and sedimentation. A first stage includes the crustal necking that goes along with the deposition of synrift deltaic sequences decoupled above prodelta shales. During hyperextension, a high sediment supply is linked to migration of depocenters and extension oceanward. The prodelta shale layer acts as the main decoupling level, gravity sliding affects synhyperextensional sediments, and dome-shape structures start to form. During a third stage, deformation migrates outboard, while formation of dome structures continues in the Liwan sag basin. Although the process controlling these dome-shape structures remains unclear, a magmatic origin is likely. Diffuse deformation related to differential compaction and minor magmatic additions continued to affect the margin after the onset of seafloor spreading.