Abstract: Trace elements of the Paleocene strata from several exploration wells in the Lishui Sag were analyzed and the characteristics of paleosalinity, paleoclimate, redox environment, paleowater depth, and paleoproductivity were systematically discussed, to identify the main factors of the formation and development of high-quality source rocks in the sag. Results show that the Paleocene strata are relatively enriched in Li, Ti, V, Zn, Ga, Rb, Ba, Hf, and Th elements, but relatively depleted in Cr, Mn, Co, Ni, Cu, Sr, Nb, Zr, Ta, and U elements in comparison to those in the upper crust of the earth. The parent rocks are mainly related to acidic magmatic rocks. The paleoenvironment of the Paleocene deposits was a relatively shallow fresh-brackish water as indicated by the contents of Li, Sr, Ni, Ga, and Sr/Ba. The paleoclimate was dry and hot with a certain vertical variation as revealed by the changes in Sr/Cu ratio. The paleoclimate in the early-middle Paleocene was hot and arid, and the late Paleocene was in alternation from warm-humid, dry-hot, to warm-humid. The paleo-depositional redox condition was weakly oxidized to weakly reduced as unveiled by Ni/Co, V/Sc and Mo contents. The paleo- productivity was relatively high with high hydrocarbon generation potential. In particular, Lingfeng Formation has the highest productivity and greater exploration potential. It is found that the content of total organic carbon of the Paleocene samples is positively correlated with paleoproductivity parameters, redox conditions, water salinity parameters, and paleoclimate parameters. Many factors indicating sedimentary environment play a synergistic role in controlling the development of high-quality source rocks in the Lishui Sag.