Abstract: Shales of the Second Member of Funing Formation (E₁f₂, the Paleogene) in the Gaoyou Sag, Subei Basin, Jiangsu, East China, have been proved to have commercial shale oil flow. Analysis on the core of the HY1 well showed that the shales are mainly felsic-calcilutite/dolomitic, felsic-argillaceous, or argillaceous felsic, which constitutes the laminated felsic-argillaceous mixed facies and felsic-calcilutite/dolomitic mixed rocks facies. The analyses of major and trace elements showed that the shale lithofacies is mainly controlled by the paleosalinity, paleoclimate, and paleowater depth. According to the sedimentary paleoenvironmental reconstruction and the analyses of the development of rock facies, the felsic-argillaceous mixed rocks facies were formed in deep-water humid and low-salinity depositional environment; the laminated felsic-argillaceous mixed rocks facies and felsic-calcilutite/dolomitic mixed rocks facies reflected the semi-deep-water and semi-saline-water relatⅣely humid environment; and the laminated felsic-calcilutite/dolomitic mixed rocks facies were deposited in a shallow-water arid and high-salinity depositional environment. The research results are of great scientific significance to the analysis of shale facies distribution and prediction of shale reservoir “sweet spot”.