Seems like you body has finally gotten to the point when it has healed from eating SAD and the results are showing, everyone responds differently and at their own individual pace to getting healthy. SOme see results in a few weeks some cam take months or years before the body looks / feels like it is supposed to at that age & activity level. The human body is much smarter than the brain.

As for me I took about a year for noticeable changes in my body, I lost weight at the start, then as I slowly healed my body was able to express itself as it was meant to. True health, throughout the entire body and all it's associated systems can take time to achieve, depending on how metabolically deranged one was when they went paleo. I now look better and certainly preform better than most guys half my age (I am 47), nobody ever thinks I am the age the that I am and I out work all the young guys on my crew all day long in a physically demanding job.

It's likely that you haven't gained much muscle but it was previously just hidden by a thin layer of fat. Now the fat is gone, you can see the muscle underneath.

When I first went Paleo, I did it low carb, and lost some weight (about 20-25 pounds) and about 3 1/2 inches off of my waist (four belt sizes). This happened pretty quickly, in a few months. I also changed my exercise routine to be intense and strength based (kettlebells, floor exercises, etc) instead of running.

In the following 4 months or so, I added back more carbs, and continued to feel good. I did not lose any more weight, but I lost another inch or so off of my waist. I also have noticeably better muscle definition, and am noticeably leaner. It is to the point that most of my clothes feel a size too big. My wife says that even my hands and knees look leaner.

I find it very interesting that I eat more carbs now than I did while losing weight, but feel good and continue to get leaner. I don't look at the scale any more. I did a couple of weeks ago and I had gained back about 4-5 pounds of the weight that I lost, but I am a belt size smaller, so it is possible that I lost fat and gained muscle.

same thing happened to me; i have gained muscle.
i put it down to the high % of good fats in my diet now.

through-out my life (prior to paleo-2.0) i found it very hard to gain muscle, even though i've always hit the weights & messed about with calories, macronutrients, supplements etc,........ but i was never high in dietary fat until i started paleo

I like the suggestion of increased rest.

Perhaps there is another possibility. Intermittent fasting is thought to increase HGH secretion, but its not clear how. Likely the signal is pseudo-starvation, which is certainly equal to low insulin release in some sense.

If you are following Paleo well enough, perhaps along with low insulin secretion you are getting some HGH release.

Perhaps someone with intermittent fasting experience could chime in?

Maybe it simply was fat loss exposing muscle. Fat does weird things and it seems to vanish in bursts.

Possibly what happens is that it gets less dense, and the space is filled by water between cells, and eventually the body says "Why am I hanging on to this water?"

I've noticed that quite often if I weigh myself every day, there was little or no change to the point where it was the same exact weight every day, but the water/fat contents change slightly, but then one day, just like that, the bulk vanishes. But, I did catch it in progress a few times, where it feels that areas of fat that were previously harder got softer and softer.

Of course, it could also be you got enough rest/proteins and the muscles did get repaired in a short amount of time, so they're larger.