The objective of this study is to reconstruct the depositional environments of Permian sediments that formed the Phosphoria Formation in the southeastern Bighorn basin. Data of stratigraphy, petrology, and sedimentation are synthesized to achieve this objective. Upper and lower members of the Phosphoria are defined. Each is characterized by distinctive facies patterns, separate sources of sedimentary materials, and differences in depositional environments. Extensive eastward transgressions, and lesser regressions produced the facies change in the upper member from dolomite in the SW. to anhydrite and redbeds eastward. Sand grains derived from the underlying Tensleep Sandstone characterize the lower member; this detritus was supplied from topographic highs of the Tensleep erosion surface and was deposited in shallow bays bordering the transgressing lower Phosphoria sea. Five types of dolomite are described: 1) dolomite mudstone, 2) detrital dolomite, 3) skeletal dolomite, 4) pelletal dolomite, and 5) ooelitic dolomite. These types are distinguished on the basis of limestone megatextures that persisted through dolomitization. The dolomite is associated with claystone, anhydrite, intraformational breccia, sandstone, and conglomerate. Dolomitization and redistribution of anhydrite are the most important diagenetic processes that have modified or destroyed porosity.