Abrupt facies changes from the underlying terrigenous mudstone of deep-water facies upward into reefal limestones were observed on Pleistocene scleractinian reefs in southwestern Taiwan. To reveal the initial mechanisms of reef development, we examined the lithologies and vertical facies changes of 7 outcrops and 37 borehole cores from the Takangshan Reef and performed petrographic and isotopic studies. Various occurrences of dolomitic mudstone were observed from 6 outcrops and in 11 borehole cores, containing massive dolomitic mudstones, carbonate pipes, dolomitic cobbles, and dolomitic pebbles. The δ¹³C values of 27 samples ranged from -53.7‰ to -10.4‰, indicating that the carbonate cements of these mudstones were all cold-seep carbonates in origin. The majority of the cold-seep carbonates and a funnel-shaped structure packed with dolomitic cobbles were precipitated and formed within fine-grained siliciclastic mudstones. The wide occurrence of seep carbonates in the study area suggests hydrocarbon seepage having occurred extensively. The compact nature and associated large lucinid bivalves in massive cold-seep carbonates further indicate a pronounced, long-lasting seepage of methane occurring antecedently to the development of Takangshan Reef. A schematic model was proposed to illustrate the occurrence of various associations of lithologies and lithofacies. The erosional surfaces on siliciclastic mudstones and the funnel-shaped structure, as well as the exhuming of massive cold-seep carbonates may have occurred concurrently during a tectonically unstable time in SW Taiwan. The deposition of fossiliferous mudstone interfingered with the conglomerate lithofacies represents a rapid facies transition from a siliciclastic (non-carbonate) to a carbonate environment. The root of this rapid facies change is presumed to be tectonic movement, probably related to the westward thrust migration in the Pleistocene foreland basin. The exposed massive seep carbonates provided a substrate for the encrustations of corals as well as coralline algae and might have played a crucial role in the initial development of coral reefs in a siliciclastic paleoenvironment. To our best knowledge, this is the first case in the world of cold-seep carbonates acting as an initial colonization hardground for hermatypic corals and corallines.