Abstract: The discovery of natural gas in the Enping 17 Subsag, Pearl River Mouth Basin, South China Sea, has opened up new frontiers for natural gas exploration in the shallow waters of the Pearl River Mouth Basin. However, systematic understanding of the gas generation potential of the Wenchang Formation (Middle Eocene) source rocks and the origin of natural gas in the Enping 17 Subsag is lacking, which has severely constrained deep-layer exploration planning. To address this knowledge gap, we integrated geochemical analysis and simulation techniques to comprehensively evaluate source rock characteristics and gas generation processes. Results reveal that the Wenchang Formation comprises two distinct source rocks units. The lower Wenchang Formation is dominated by semi-deep to deep lacustrine-facies high-quality source rocks, being characterized by high sapropelic and exinite group maceral content, and these rocks were formed in reducing environments under humid climatic conditions with abundant aquatic vegetation and favorable water column nutrient levels. The upper Wenchang Formation is primarily shallow lacustrine facies source rocks with dominant terrigenous organic input, being characterized by high vitrinite group maceral content, indicating a relatively deteriorated lacustrine environment. Geochemical signatures indicate that the natural gas is low-maturity mixed-origin kerogen cracking gas originated from both Wenchang and Enping (Late Eocene) formations, confirming a dual contribution of these two source rock units. Semi-deep or deep lacustrine facies source rocks have the characteristics of “concentrated oil-generation and late-stage explosive gas generation”. Shallow lacustrine facies source rocks have the ability of “wide-window and continuous gas generation”. We clarified that the origin and sources of natural gas in the Enping 17 Subsag, quantified the gas generation potential of source rocks, and identified that semi-deep to deep lacustrine source rocks as the primary gas-bearing source rocks and shallow lacustrine source rocks as significant supplementary gas-bearing sources. This study provided a scientific basis to optimize the exploration targets in the region, and offered a good application case significant for the exploration of similar sags in the shallow-water areas of the Pearl River Mouth Basin.