The Fengcheng Formation is a nonmarine, carbonate-dominated succession that formed under arid climatic conditions in a hydrologically closed basin. Two transects and two seismic profiles were examined, the characteristics and environmental significance of different lithofacies were studied, and a model of depositional environment divisions was proposed. The sedimentary model involved an alkaline lake in which the depositional environments consisted of a shallow saline lake margin, slope, saline lake center, and steep lake margin from northeast to southwest. The perennial central salty lake was located in the southwestern part of the study area, whereas there were widespread, low-gradient lake margins in the northeast, east, southeast, and southern parts of the study area. Lake-level fluctuations had a major influence on the shallow saline lake system and complicated the depositional environments in these areas. The deposits are derived from bedrock reworking, volcanic eruptions, and authigenic minerals that precipitated from brine during the hypersaline phase. Fine-grained terrigenous clastic sediments, volcanic ashes and dusts, and authigenic minerals mixed in the depocenter (concentration center of the brine pool), which was covered by high-salinity brines, and the depositional environment was anoxic as a result of salinity-based brine stratification. A thick sodium carbonate succession occurred in the depocenter of the ancient Mahu lake, where bedded sodium carbonate alternated with fine-grained, organic-rich tuff or tuffaceous hydrocarbon source rocks. Microorganisms bloomed in the alkaline, high-salinity brine, and the organic matter was well preserved, which is similar to those modern alkaline saline lakes in eastern Africa and western North America. Thus, the Permian Fengcheng Formation contains source rocks that formed in an alkaline saline lake.