Three stages of diagenesis can be identified in the sediments that form the Alloway Clay Member of the Miocene Kirkwood Formation in New Jersey. Clay- and sand-size muscovite, mixed with woody debris, formed the original sediment. These materials were deposited in restricted lagoons receiving a high amount of fresh water runoff. Transgression of the sea then resulted in the deposition of marine clays above the lagoonal sediments. Following regression, the muscovite was altered to sand-size kaolinite by the action of acidic ground water. This highly permeable unit was locally cemented by deposition of siderite, forming large concretions. Later, all calcareous fossils in the macrokaolinite bed were removed by dissolution, while those inside the siderite concretions were preserved. These diagenetic episodes are controlled by changes in Ca+2 and Fe+2 concentration of the ground water and, significantly, by permeability.