Abstract The ENE striking Altyn-Tagh Fault and the WNW striking Karakax Fault are two major strike–slip fault systems in northern Tibet, and form a prominent ~ 2000 km long fault system. The 2008 Yutian normal faulting earthquake (Mw 7.1) struck near the southern edge of the Tarim Basin, where the two fault systems converge. While there are numerous NS-trending normal faults particularly in southern Tibet, their tectonic origins have remained contentious. Based on crustal deformation data sets obtained from synthetic aperture radar (SAR) as well as aftershock distribution, we developed a non-planar fault source model for the 2008 Yutian earthquake that exhibits a large normal-fault slip on a west-dipping surface with a nearly NS strike, thus suggesting a localized EW trending extensional stress field. The extensional stress was presumably generated at a step-over region of two NE-trending left-lateral strike–slip faults, which would probably belong to the Altyn-Tagh and Longmu–Gozha Co Fault Systems. In the epicentral area, there exists a fault scarp that coincides with the top edge of our fault model, and thus similar earthquakes must have occurred over geological time. Such normal faulting earthquakes must have been repeatedly suppressed the left-lateral slip behavior of the Karakax Fault. In addition, if the slip along the Altyn-Tagh Fault is transferred to the Longmu–Gozha Co Fault, which is SE across the normal fault system, the slip rate of the Karakax Fault would be less than that of the adjoining Altyn-Tagh Fault.