Trace fossils have proven useful for studying the timing and process of biotic recovery after the Permian–Triassic Mass Extinction (PTME). Recovery stages are defined by comparing successive ichnoassemblages from the latest Permian to the early Middle Triassic. Lower Triassic trace fossils have been explored in some detail, but those of the lower Middle Triassic are less well known. Here, well-preserved fossil materials from the Luoping Biota from Yunnan Province, South China suggest that a fully recovered shallow-marine ecosystem was re-established by the early Middle Triassic. Trace fossil assemblages of the Luoping Biota are characterized by high ichnodiversity, with 14 ichnogenera in the shallow-marine environment of an intra-carbonate platform basin, and nine ichnogenera in the subtidal environment. Such moderate to high ichnodiversity, together with a marked increase in burrow sizes and the common occurrence of key ichnotaxa (e.g. Rhizocorallium and Thalassinoides), suggests that the ichnofauna had reached recovery stage four. In contrast, non-turbiditic strata of the offshore setting record only three ichnogenera, with bioturbation indices never exceeding one. Periodic anoxia in bottom waters was presumably the main control for such a protracted trace fossil recovery in an offshore setting, which otherwise aided the fine preservation of body fossils of the Luoping Biota. Furthermore, event sedimentation (turbidite deposits) in the offshore setting incorporated moderate ichnodiversity and moderate to high bioturbation indices, both interpreted as a result of short-term colonization by transported infaunal animals from proximal settings. The occurrence of variable crustacean traces (e.g. Sinusichnus, Spongeliomorpha, and Thalassinoides) at Luoping and the locomotion traces of marine reptiles, together with abundant fishes and fossil decapods, highlights the value of trace fossils in ecosystem reconstruction after the PTME.