"Castorocauda" is part of a Middle Jurassic mammaliaform diversification event, wherein mammaliaforms radiated into a wide array of niches and evolved several modern traits, such as more modern mammalian teeth and middle ear bones. It was previously thought that mammals were small and ground-dwelling until the Cretaceous–Paleogene boundary (K–Pg boundary) when dinosaurs went extinct. The discovery of "Castorocauda", and evidence for an explosive diversification in the Middle Jurassic – such as the appearance of eutriconodontans, multituberculates, australosphenidans, metatherians and eutherians, among others – disproves this notion. This may have been caused by the breakup of Pangaea, which started in the Early to Middle Jurassic and diversified habitats and niches, or modern traits that had been slowly accumulating since mammaliaforms evolved until reaching a critical point which allowed for a massive expansion into different habitats.