The Anji Biota is a unique deposit with exceptionally preserved sponges and other organisms in deep-water, uppermost Ordovician mudstone of Zhejiang Province, China. The sponge fossils preserve remarkable details including carbonaceous preservation of soft tissues and axial filaments of spicules, but the taphonomy of the deposit has not previously been documented in detail. This paper documents the complex taphonomic processes responsible for preservation of sponges in the Anji Biota. The most unusual element is a rapid switch from initial pyrite framboid growth throughout the soft tissues, to subsequent rapid silicification of the carbonaceous soft tissue remains, and re-dissolution of the pyrite. This combination implies transiently anoxic post-burial conditions, subsequently becoming rapidly re-oxygenated. Uranium/thorium data confirm an oscillating redox environment. This taphonomic model may apply more widely, as the fossils show striking similarities to published observations of the Cambrian sponge-dominated Hetang Biota; however, it differs from most described modes of exceptional preservation, and represents a new variation on the preservation of pyritized soft tissue.