Textural, petrographic and stable isotopic evidence suggest that a zoned concretion (Birchi Bed, Lower Lias, West Dorset, UK), formed under very shallow burial, with carbonate cement passively filling the pore spaces. The calcitic core of the concretion formed initially, whilst the intermediate and outer edge cements, which are dominated by a dolomite and a calcite respectively, precipitated successively. Mixtures of calcite and dolomite occur in the intermediate zone and outer rim, suggesting initial incomplete cementation and later back‐filling. The enveloping fibrous calcite vein (beef) formed later by displacive crystallization. The concretionary carbonates preferentially preserve labile organic compounds (i.e. unsaturated fatty acids) not found in the surrounding shales. Fatty acid distributions in the concretion are distinct and informative. The presence of 10‐methylhexadecanoic acid provides direct evidence for sulphate‐reducing bacteria in the calcitic core whereas the abundance of unsaturated fatty acids in the concretion as a whole is attributed to localized bacterial production and its early formation. The core probably formed in the sulphate reduction zone, whereas dolomite in the intermediate zone was derived largely from methanogenesis and iron reduction, although direct biomarker evidence for methanogenesis was not found. The outer rim and the fibrous calcite vein probably resulted from ‘late’ bacterial processes, probably including renewed sulphate reduction. The complex biogeochemistry of the sedimentary environment is reflected by the concentrations and distributions of biomarkers and by the detailed petrography. Nevertheless, carbonate concretions can provide a ‘snapshot’ of early diagenesis in ancient mudstones.