Fine-fraction clays from the Chiang Muan mine in Phayao Province, northern Thailand, were studied using the x-ray diffraction method. The analysis determined the parent rocks and depositional environments of clays. Clay minerals in this area are subdivided into three zones of I to III. In zone I, montmorillonite is dominant, followed by kaolinite and illite. These clay minerals were derived from Jurassic rhyolite, tuffaceous shale, and sandstone in the southern part of the Chiang Muan basin. Kaolinite and illite are dominant in zones II and III. These minerals are the alteration products of feldspar and mica and probably had the same origin as those of zone I. Montmorillonite is abundant in the Underburden unit of mine but it is much less in the Lower coal zone unit. This suggests that the climate changed about 13 million years ago. Later the amount of kaolinite and illite increased because of much weathering. These clay minerals assemblages indicate that the area in which they were deposited had changed from a dry temperate to a tropical climate and a high meteoric water supply. The paleocurrent direction in the area was northward during initial deposition as suggested by clay mineral assemblage. The present current in the area flows from north to south.