Lacustrine organic-rich source rocks (shales and mudstones) were examined to assess the depositional environment and organic input sources of the third and fourth members of the Eocene Shahejie Formation, Bohai Bay Basin, China. Major organic contributions to the Shahejie Formation from dinoflagellates, diatoms, Botryococcus and marine pelagophyte/chrysophyte algae were determined using n-alkane distributions, gammacerane index and diagnostic steranes. Traces of higher plant biomarkers suggest that terrigenous organic inputs were limited. The pervasive presence of β-carotane, aryl isoprenoids, paleorenieratane, renieratane, isorenieratane, 2α-methylhopanes and crocetane indicate significant organic contributions from bacterial communities including cyanobacteria, purple sulfur bacteria (Chromatiaceae), green sulfur bacteria (Chlorobiaceae), and sulfate-reducing bacteria. The extent of H2S content, bacterial sulfate reduction, and photic zone euxinia (PZE) were evaluated by determining the aryl isoprenoids ratio (AIR: 0.7–9.0), the presence of isorenieratene derivatives, and the fate of sulfur in the water column. There was a decrease of PZE extent and duration from the northeast to the southwest of the palaeo-lake, and there was a decrease of water body salinity and bottom water anoxia from the fourth to the third member of the Shahejie Formation. Abrupt environmental perturbations in the third member of the Shahejie Formation are indicated not only by significant changes in parameters such as the pristane/phytane and β-carotane/n-C20 alkane ratios, the gammacerane index, the isorenieratane/C18 aryl isoprenoid, and the AIR, but also by the time lag in the expansion of cyanobacterial lineages after the expansion of purple/green sulfur bacteria, as well as seawater incursions. The unexpected occurrence of intact C30 4-desmethylsteranes (24-n-propylcholestanes) in the Shahejie Formation is first reported here, after very careful checking, and provides unambiguous biological evidence for at least two marine transgression events reaching the Eocene Dongying palaeo-lake. The organic enrichment of the petroleum source rocks in the Shahejie Formation is a consequence of combined indigenous lacustrine algal production, the constrained and favourable preservation conditions, and significant bacterial contributions and marine organic matter inputs to the lake.