The science of the provenance, sedimentary system, and distribution of sand bodies is unclear, limiting oil and gas exploration. Here, we combined heavy mineral, rare earth element, petrographic, and outcrop data to shed new light on the provenance, depositional environment, and paleoclimatic conditions of the Permian Jiamuhe Formation. The provenance is characterized by “a main provenance system, and four provenance zones,” and this result could be interpreted from analyses of its seismic reflection, clastic composition, REES, and heavy minerals. A detailed sedimentological study performed in the excellent outcrops, a comprehensive analysis of logging, and the legalistic cores of this formation allowed for the identification of ten lithofacies and three lithofacies associations. Four distributary/underwater channels were observed. Furthermore, the redox and paleoclimatic conditions based on trace elements (Th/U, V/(V + Ni), V/Cr, Cu/Zn, Sr/Ba, and Sr/Cu) suggested a weak reduction in the environment, as well as semi-humid and semi-dry conditions of the Jiamuhe Formation. These conditions are also supported by the mudstone color and plant fossils. The tectonic setting belongs to the acid island arc area based on the trace element discrimination diagram of La-Th-SC and the values of the La, Ce, ΣREE, L/H, La/Yb, and (La/Yb)N criteria. The research results further confirm that there are differences in the mineral compositions in the same provenance area, and they provide a geological basis for the fine sedimentary facies characterization and a favorable zone prediction in this area.