The mineralogy and chemical composition of clays in evaporite strata of the Palo Duro Basin, Texas Panhandle, were investigated to determine the type and extent of alteration and to explore the preservation of diagenetic clays in changing geochemical environments. The coarse clay-size fraction (2-8 mu m equivalent settling diameter (ESD)) contains predominantly illite and irregularly interlayered chlorite/vermiculite, whereas the fine-clay-size fraction (< 0.5 mu m) contains predominantly illite and irregularly interlayered chlorite/smectite. Detrital illite, biotite, chlorite, and smectite are the probable parent clays. Electron microprobe analysis of clay-size flakes shows that the diagenetic clays are enriched in magnesium relative to detrital clays. Chemical compositions, the geologic history of the Palo Duro Basin, and comparison to clays from other Paleozoic marine evaporites suggest that alteration occurred syndepositionally in the presence of hypersaline marine evaporite brine. Mineral assemblages of clays encased in primary marine halite, clays from regions where halite has been dissolved, and clays from strata approximately 300 m beneath the salt section are structurally and chemically similar, suggesting that these clay minerals record paleohydrologic and paleoenvironmental conditions.