The lower Cambrian (Stage 3) Yu'anshan Formation in Yunnan Province, South China hosts the Chengjiang Lagerstatte, an exceptional window on the Cambrian Explosion. However, skeletal microfossils from this formation have long been neglected owing to the dominance of siliciclastics over carbonates. Here we characterize a new assemblage of small shelly fossils from the Maotianshan Shale Member of the Yu'anshan Formation. The assemblage consists of univalved mollusc, hyolith and brachiopod shells, trilobite and bradoriid carapaces, chancelloriid sclerites, sponge spicules, and echinoderm ossicles. Combining this information with taxonomic data previously tabulated for fossil assemblages from three other facies, we performed quantitative comparisons of the genus-level taxonomic diversity and modes of life and nutrition of four mutually equivalent, early Cambrian (Age 3) paleocommunities: (1) skeletal faunas of the inner shelf; (2) predominantly soft-bodied faunas of the intra-shelf basin; (3) archaeocyathan faunas of the carbonate shelf; and (4) sponge-dominated faunas of the slope to basin areas. The taxonomic and paleoecological distinctness of these four paleocommunities indicate possible low levels of competition within the communities and rapid expansion of habitat (ecospace) ranges, though with similarities in the taxonomic composition of poriferans and arthropods reflecting the rapid migration of these two groups into new habitats. The present, integrative study provides a more comprehensive portrait of metazoan diversification and paleocommunity evolution during the peak phase of the Cambrian Explosion than do investigations based on single communities.