Carbonate rhizoliths and related features are environmental and ecological indicators of not only palaeosols, but also modern soils. They designate subaerial vadose and pedogenic diagenesis environments. Rhizoliths are commonly used as a tool for paleoenvironmental reconstructions, but uncertainty remains regarding their formation mechanisms. Field characteristics of the dune rhizoliths in the Badain Jaran Desert, NW China were analyzed to investigate formation mechanisms and interpret paleoenvironmental significance. Systematic field sampling and intensive examination showed that the tube-like rhizoliths without morphological structures of plant roots have been placed at the dune soil surface following erosion and weathering but the underground rhizoliths are still connected to the dead Artemisia roots. Rhizoliths occurred only along the windward, long gentle slopes of mega-dunes. Their distribution patterns of both types in connection with plant distribution and landscapes have been studied. Their petrological and mineralogical characters were performed in detail using microscopic and spectroscopic techniques (cathodoluminescence, scanning electronic microscopy and energy dispersive X-ray spectroscopy) in laboratory. Altogether, field and laboratory analyses showed that rhizolith cement is calcium carbonate and despite the high porosity of soil and high aridness of climate, soil moisture plays an important role in sustaining Artemisia growth and rhizolith formation. Desert rhizoliths can therefore be used as a proxy to infer local soil moisture and plant communities. Moreover, as soil moisture content is related to climate and landscape position, rhizoliths could indirectly be indicators of aboveground environmental conditions, e.g. annual precipitation or humidity.