The age and mode of formation of the South Caspian Basin are disputed. An ∼10-km-thick, predominantly middle Eocene clastic and volcanic succession is exposed in the Talysh mountains of Azerbaijan at its western margin. Here, high-K alkali basalts pass laterally to the east and southeast into volcanogenic sandstone-dominated turbidity current and debris-flow deposits. These southeasterly directed depositional systems accumulated in water depths generally greater than 200 m and fed directly into the western South Caspian Basin. New Ar-Ar ages cluster around 39 Ma, with an upper, 1400-m-thick volcanic interval being deposited in 2.2 ± 0.2 m.y. We interpret that this rapid deposition and magmatism records a major back-arc extensional/transtensional event in the Talysh, north of the north-dipping Neotethyan subduction zone. This event is recognized across much of southwest Asia and may indicate a period of significant basin formation within the adjacent South Caspian Basin. A transition into Upper Eocene–Lower Oligocene strata, dominated by fine-grained turbidity current and hemipelagic sediments with slope instability features, is interpreted to mark the end of rifting and volcanism in the Talysh and the start of the Arabia-Eurasia collision. Overlying Oligocene coarse clastic rocks are interpreted as the erosional products of localized topography created by the further propagation of compressional deformation into the Talysh region.