Sedimentary basins record crustal-scale tectonic processes related to the construction and demise of orogenic belts, making them an invaluable archive for the reconstruction of the evolution of the North American Cordillera. In southwest Montana, USA, the Renova Formation, considered to locally represent the earliest accumulation following Mesozoic−Cenozoic compressional deformation, is widespread but remains poorly dated, and its origin is debated. Herein, we employed detrital zircon U-Pb and (U-Th)/He double dating and sanidine 40Ar/39Ar geochronology in the context of decimeter-scale measured stratigraphic sections in the Renova Formation of the Muddy Creek Basin to determine basin evolution and sediment provenance and place the basin-scale record within a regional context to illuminate the lithospheric processes driving extension and subsidence. The Muddy Creek Basin is an extensional half graben in southwest Montana that is ∼22 km long and ∼7 km wide, with a >800-m-thick sedimentary package. Basin deposition began ca. 49 Ma, as marked by multiple ignimbrites sourced from the Challis volcanic field, which are overlain by a tuffaceous fluvial section. Fluvial strata are capped by a 46.8 Ma Challis ignimbrite constrained by sanidine 40Ar/39Ar dating. An overlying fossiliferous limestone records the first instance of basinal ponding, which was coeval with the cessation of delivery of Challis volcanics−derived sediment into the Green River Basin. We attribute initial ponding to regional drainage reorganization and damning of the paleo−Idaho River due to uplift and doming of the southern Absaroka volcanic province, resulting in its diversion away from the Green River Basin and backfilling of the Lemhi Pass paleovalley. Detrital zircon maximum depositional ages and sanidine 40Ar/39Ar ages show alternating fluvial sandstone and lacustrine mudstone deposition from 46 Ma to 40 Ma in the Muddy Creek Basin. Sediment provenance was dominated by regionally sourced, Challis volcanics−aged and Idaho Batholith−aged grains, while detrital zircon (U-Th)/He (ZHe) data are dominated by Eocene cooling ages. Basin deposition became fully lacustrine by ca. 40 Ma, based on an increasing frequency of organic-rich mudstone with rare interbedded sandstone. Coarse-grained lithofacies became prominent again starting ca. 37 Ma, coeval with a major shift in sediment provenance due to extension and local footwall unroofing. Detrital zircon U-Pb and corresponding ZHe ages from the upper part of the section are predominantly Paleozoic in age, sourced from the Paleozoic sedimentary strata exposed in the eastern footwall of the Muddy Creek detachment fault. Paleocurrents shift from south- to west-directed trends, supporting the shift to local sources, consistent with initiation of the Muddy Creek detachment fault. Detrital zircon maximum depositional ages from the youngest strata in the basin suggest deposition continuing until at least 36 Ma. These data show that extension in the Muddy Creek Basin, which we attribute to continued lithospheric thermal weakening, initiated ∼10 m.y. later than in the Anaconda and Bitterroot metamorphic core complexes. This points to potentially different drivers of extension in western Montana and fits previously proposed models of a regional southward sweep of extension related to Farallon slab removal.