Hydrocarbon generation of source rocks is controlled by both the source and evolution of organic matter (OM). Pyrolysis parameters are often used to reflect the hydrocarbon generation capacity. In Dongying sag, the ratio of hydrocarbon generation between the lower Es3 and upper Es4 submember is 1:3, but the pyrolysis parameters cannot accurately reflect this difference. The source, preservation and evolution of OM of the lacustrine mudrocks in the Dongying Sag were studied by palynofacies analysis. The palynofacies can be divided into five types (PF1 to PF5), among which PF5 and PF4 are rich in terrestrial plant tissue fragments and macrophytes fragments, respectively, with weak hydrocarbon generation ability. PF1, PF3 and PF2 are enriched in different types of amorphous organic matter (AOM), respectively. The first two types of OM assemblages are mainly preserved in rocks as particulates with a low degree of evolution, while PF2 is rich in spongy AOM, closely bound with minerals and highly evolved. Differences in preservation methods have affected the evolution of OM, which cannot be accurately reflected by pyrolysis parameters. Further comparing the OM composition each layer, it is found that source rocks in the middle Es3 submember are rich in PF4 and PF5 with weak hydrocarbon generation capacity, which are in line with a poor performance of pyrolysis parameters. The lower Es3 submember is enriched with “particulate” PF1 and PF3, the evolution degree of OM is low, while the upper Es4 is enriched with “mineral-bound” PF2 with higher OM maturation and higher hydrocarbon potential. In general, hydrocarbon generation potential of source rocks is jointly controlled by multiple factors including the source, preservation and evolution of OM. Comprehensive analysis combined with palynofacies and pyrolysis methods is needed to accurately judge the hydrocarbon generation capacity of source rocks.