The Bayan Obo deposit in Inner Mongolia, North China Craton (NCC) is the largest rare-earth element (REE) resource in the world. Due to the complex element and mineral compositions and the activity of several geological events, the ore-forming mechanism is still controversial. Previous models are reviewed here to provide information for further investigation on the Bayan Obo deposit. In this study, we summarize all different types of Fe-REE-Nb mineralization using field observations and microscope work, in which we recognize 9 types of Fe-REE-Nb ores in the Bayan Obo ore district. By compiling and re-evaluating a large number of published geochemical data, this paper provides solid evidence that the Bayan Obo deposit formed through interaction between sedimentary rocks and carbonatite magmatism. From the results of our review, it can be conjectured that the formation of iron ores was originated from sedimentation (Pt1), whereas the formation of REE mineralized dolomite might be related to interaction and reaction between the carbonatite magmas and/or associated fluids with sedimentary carbonate rocks, with the REE-bearing carbonatite magmas having undergone intense fractionation enrichment process. The C-O-S-Fe-Mg isotopes indicate that the REE-Nb mineralization was derived from metasomatism (fenitic alteration) of sedimentary carbonate. A new model is proposed for this unique REE-Nb mineralization, which is related to the subduction of Siberian Craton beneath the North China Craton since Early Paleozoic period. We interpret that the Bayan Obo Fe-REE-Nb ore deposits and their massive barren host, H8 dolomite, were generated as a result of interaction of fluids expelled from a subcontinental lithospheric mantle (SCLM)-derived carbonatite magma with sedimentary carbonates.