Early-middle Ediacaran organic-walled microfossils from the Doushantuo Formation studied in several sections in the Yangtze Gorges area, South China, show ornamented cyst-like vesicles of very high diversity. These microfossils are diagenetically permineralized and observed in petrographic thin-sections of chert nodules. Exquisitely preserved specimens belonging to seven species of Appendisphaera, Mengeosphaera, Tanarium, Urasphaera and Tianzhushania contain either single or multiple spheroidal internal bodies inside the vesicles. These structures indicate reproductive stages, endocyst and dividing cells, respectively, and are preserved at early to late ontogenetic stages in the same taxa. This new evidence supports the algal affiliations for the studied taxa and refutes previous suggestions of Tianzhushania being animal embryo or holozoan. The first record of a late developmental stage of a completely preserved specimen of T. spinosa observed in thin-section demonstrates the interior of vesicles with clusters of identical cells but without any cavity that is diagnostic for recognizing algal cysts vs animal diapause cysts. Various lines of evidence to infer biological affinities of these microfossils – morphology, reproductive characters, spatial arrangement of cells, and biochemical properties of the vesicle wall – are collectively characteristic of algal clades. Recognizing the biological affinities of these microfossils is key to understanding whether animals capable of producing such morphologically complex diapause cysts had an early Ediacaran fossil record (633–610 Ma), or the microfossils were non-animal holozoans or algae as argued herein for Tianzhushania spinosa and other studied microfossils.