AbstractThe Neolithic occupation of Penedo dos Mouros in the foothills of Serra da Estrela, Portugal's highest mountain, dates to the 5th to 4th millennia cal B.C. The site's faunal assemblage is extremely rare in the regional prehistoric archaeological record, due to the acidity of the granitic geology. This underlines Penedo dos Mouros importance as a reference site for understanding early pastoralism in the region. Due to the insufficient survival of bone collagen for radiocarbon dating and the homogeneity of the stratigraphy, where most visible contacts are due to post‐depositional processes, we chose micromorphology to address the reasons behind the bone preservation and to assess the stratigraphic integrity of the prehistoric deposit. Reworking of eroding saprolitic soils was a major factor in the sediment accumulation, with remains of short human occupation events. Possible evidence for clearance fires linked to the first occurrences of pastoralism practised in the region, creating open spaces for grazing, was identified. Post‐depositional carbonate cementation derived from ashes, identifiable at the microscopic scale, enabled bone preservation. Carbonate and spodic‐like features document water saturation once the sedimentation ceased. This sedimentary dynamic has broader geomorphological implications, such as an inferred post‐Neolithic incision of the stream valley adjacent to the site.