Field, petrographic, microstructural and isotopic studies of mylonitic gneisses and associated pegmatites along the Hope Valley shear zone in southern Rhode Island indicate that late Palaeozoic deformation (c. 275 Ma) in this zone occurred at very high temperatures (>650 °C). High-energy cuspate/lobate phase boundary microstructures, a predominance of equant to sub-equant grains with low internal lattice strain, and mixed phase distributions indicate that diffusion creep was an important and possibly predominant deformation mechanism. Field and petrographic evidence are consistent with the presence of an intergranular melt phase during deformation, some of which collected into syntectonic pegmatites. Rb/Sr isotopic analyses of tightly sampled pegmatites and wall rocks confirm that the pegmatites were derived as partial melts of the immediately adjacent, isotopically heterogeneous mylonitic gneisses. The presence of syntectonic interstitial melts is inferred to have permitted a switch from dislocation creep to melt-enhanced diffusion creep as the dominant mechanism in these relatively coarse-grained mylonitic gneisses (200–500 µm syn-deformational grain size). A switch to diffusion creep would lead to significant weakening, and may explain why the Hope Valley shear zone evolved into a major regional tectonic boundary. This work identifies conditions under which diffusion creep operates in naturally deformed granitic rocks and illuminates the deformation processes involved in the development of a tectonic boundary between two distinct Late Proterozoic (Avalonian) basement terranes.