At the base of many flood basalt sequences and along volcanic rifted margins, volcanism can compete with the existing sedimentary environments, resulting in interbedded sequences of volcanic rocks and sediments. Here we report on sediment interlayers that are found in the lowermost volcanic units of the Etendeka flood basalts in NW Namibia (Twyfelfontein and Awahab formations), part of the much larger Paraná–Etendeka Igneous Province. The sandstone bodies, predominantly eolian dunes, are isolated in a sequence of Lower Cretaceous (∼ 134 Ma) lava flows. The uppermost part or where sediment deposition and lava emplacement is observed to interact is characterized by barchanoid dunes, which were actively migrating during the emplacement of the lava flows. The fossil (isolated by lava) barchan dunes studied in Dune Valley show three characteristically different diagenetic styles. In Dune Valley, each dune body is completely encapsulated by lava, with additional igneous intrusions cutting through some bodies. We recognize three distinct styles of diagenesis: Type 1: fossilised dunes that are red in color and lack major authigenic mineralization, with grain compaction and subsequent porosity loss being the dominant diagenetic process. Type 2: dunes that have been bleached white, which have undergone a more complex diagenetic pathway. Type 2 dunes have abundant calcite, kaolinite, and böhmite as authigenic phases and lack hematite grain coatings. Detrital plagioclase is absent in white dunes (XRD analysis), with pseudomorphs of kaolinite common. This diagenetic assemblage results in the white dunes having lower porosity and permeability compared to the red dunes. The observations are probably due to a flux of carbon dioxide (CO2), hydrogen sulfide (H2S) and/or hydrogen (H2)–rich hydrothermal groundwater derived from igneous intrusions below. Type 3: “hot contact” effects at lava-flow contacts, where the unconsolidated dunes were rapidly indurated during lava emplacement (volcano-eogenesis). Type 3 diagenesis is restricted to << 1 m depth below lava contacts and common in dunes displaying both Type 1 and Type 2 diagenesis. The distribution of diagenetic Types 1 and 2 is dune specific, and throughout Dune Valley approximately half of the dunes have been bleached (e.g., Type 2 diagenesis), whereas diagenetic Type 3 is a hot contact phenomenon and is therefore found along all basal lava and dike contacts. This work has relevance to understanding the development of sediment–lava systems, to hydrocarbon exploration and development in preserved sediment–lava sequences, and the hydrothermal process described provides an example of natural CO2 sequestration.