Phyllosilicate clasts in Yamato-86720 consist mainly of dehydrated serpentine (or chlorite) and sodian talc (or saponite) components, which are the most homogeneous in chemical compositions among those in CM chondrites. They were produced from chondrules by intense hydrous alteration, resulting in the homogeneous composition of the phyllosilicates. Metal spherules and troilite grains in original chondrules have also altered to ovoidal phyllosilicate inclusions and unusual carbonate-phyllosilicates inclusions, respectively. The CaO content of the original chondrules was retained within them as the unusual carbonate-phyllosilicate inclusions, which resulted in the low CaO content of the Y-86720 matrix. The matrix is different in composition from the clast phyllosilicates, suggesting that the two were produced in conditions different from each other. Pyrrhotite grains in clasts and matrix have altered probably to ferrihydrite, which have produced Fe-rich halos around the pyrrhotite grains after the agglomeration of Y-86720 and prior to a heating event. The heating event took place in the final stage of the chondrite formation, resulting in dehydration of phyllosilicates and reduction of ferrihydrite to Co-Ni-poor kamacite.