Abstract: The features of mineralogy, organic matter and lithofacies of mudstones and shale are controlled by depositional environment. An amount of samples selected from the Shahejie Formation in the Dongying depression are studied by the authors by means of microscope, X-ray diffraction, pyrolytic analysis and chemical analysis. The results are used to establish the relationship between the element geochemistry and types of lithofacies, upon which the relationship between depositional environment and lithofacies is further revealed. The lithofacies of mudstone/shale includes thin laminated shale, discontinuous laminated shale, thick laminated shale, homogenous massive mudstone and the mudstone with anhydrite-relict. Their depositional environments are obviously different. During the time while the sub-member of Es⁴cx-Es³x was deposited, the lake evolved from deep to shallow and from saline to fresh, and was in an anoxic environment during the whole period. There is a close relationship between lithology and environment. In the early Es⁴c, it was a shallow and salty lake with deposition of anhydrite-relict mudstone and homogeneous massive mudstone; the upper Es⁴c is mainly consisting of laminated shale at the bottom and homogeneous massive mudstone on the top, as the lake changed from a salty to a brackish lake; the lower Es³ represents a deep fresh lake, rich in laminated shale. In conclusion, both the rock types and their hydrocarbon potentials are controlled by depositional environment. In this regard, further research is suggested on the relationship between lithofacies of mudstone/shale and their depositional environment.