Xisha Islands, characterized by development and evolution of typical reef systems, are the key area for reef oil and gas exploration in the South China Sea. By determining the REE contents of 107 dolostone samples selected from Well Xike- 1 in Shi Island, Xisha Islands, an analysis of REE geochemical characteristics of borehole reef dolostone was conducted for the diagenetic environment and interrelation between paleo-climatic event and dolostone stratum. Seven layers of dolostone in Well Xike-1 were similar in REE geochemical characteristics such as abundance, PAAS-normalized pattern and element anomaly, indicating a parallel diagenetic environment. Burial compaction and corresponding diagenesis caused no significant change in REE geochemical characteristics of dolostone, which could basically reflect the nature of diagenetic environment and dolomitization fluid. Several geochemical indices showed that the emergence of dolomitization in Xisha Islands could be interpreted by a seepage-reflux model under a low-temperature and meta-reducing environment with the action of high-salinity seawater. The high-salinity brine, formed in relatively closed reef-shoal lagoon and infiltrating along the rock pore, resulted in the metasomatic alteration of dolomite for calcite. The distribution of dolostone strata, corresponding to cooling events since the Miocene, was controlled by the eustatic fluctuation caused by the climate change.