The depositional environment strongly influences the shale gas potential by affecting how organic matter is preserved. Lower Zhongjiangou Formation mudstones from the DY1 well in Wudun Sag, Dunhuang Basin, northwestern China, were subjected to a series of geochemical and petrological experiments. Analyses included total organic carbon (TOC) quantification, maceral composition identification, carbon isotope analysis, and measurements of major, trace, and rare earth element concentrations. These data were used to infer paleoproductivity, redox conditions, paleoclimate, salinity, and water depth and ultimately to reconstruct the depositional environment. The lower Zhongjiangou Formation consists of gray-black, carbon-rich silty mudstones interbedded with thin coal seams. TOC content ranges from 0.53% to 25.25% with a mean value of 8.2%, and vitrinite reflectance of 0.74%-1.27% indicates an immature to mature thermal maturity range. Productivity and redox proxies, Mo content, P/Ti, V/(V + Ni), Ce anomaly (Ceanom), Th/U, and Mo-U covariance consistently indicate low primary productivity and predominantly oxygen-deficient bottom-water conditions. Organic matter was predominantly supplied by terrigenous higher plant debris rather than by in situ proliferation of algae. Paleoclimate indicators suggest a warm, semi-arid climate, whereas salinity proxies and sedimentological ratios indicate deposition in freshwater to slightly brackish, shallow to semi-deep lake conditions. Depositional cycles capture shifts between deltaic and semi-deep lake conditions. Organic matter enrichment peaked during the period of semi-deep water and anoxic conditions marked by slow sedimentation and abundant terrigenous input in Wudun Sag and thus enhanced the preservation of organic matter. These results highlight oxygen-deficient bottom-water conditions and reduced bottom-water ventilation as the main preservational controls on organic-matter enrichment in the lower Zhongjiangou Formation and provide a framework for understanding Jurassic shale gas accumulation and identifying favorable zones in the Dunhuang Basin.