Clay mineral assemblages of the Neogene Himalayan foreland basin are studied to decipher their significance with respect to tectonic and climate processes. Fluvial deposits of the Siwalik Group (west-central Nepal), and sediment of the Ganga River drainage system were analysed for clay mineralogy. The observed clay mineral assemblages are mainly composed of illite (dominant), chlorite, smectite and kaolinite. Illite and chlorite are chiefly of detrital origin, derived from Himalayan sources. Kaolinite and smectite are authigenic, and mainly developed within pore space and as coating of detrital particles. With increasing burial, diagenetic processes affected the original clay mineral signature. Illitisation of smectite and kaolinite occurred below 2500 and 3500 m depth, respectively. Therefore, illite in the lower parts of the Siwalik Group consists of a mixture of inherited illite and illitised smectite and kaolinite, as suggested by illite crystallinity. Detrital grains that make up the framework of the Siwalik Group sandstones mainly consist of quartz, feldspar and lithic fragments, which are principally of sedimentary and metamorphic origin. Lithoclast content increases over time at the expense of quartz and K-feldspar in response to uplift and erosion of the Lesser Himalaya Series since about 11–10 Ma. Despite mainly felsic source rocks, dominantly physical erosion processes in the Himalayan belt, and high-energy fluvial depositional systems, smectite is abundant in the <7 Ma Siwalik Group deposits. Analyses of the Siwalik deposits and comparison with the clay mineralogy of the modern drainage system suggest that smectite preferentially formed in floodplains and intermontane valleys during early diagenesis because of downward percolating fluids rich in cations from weathering and soil development. In general, increasing seasonality and aridity linked to variability of the Asian monsoon from about 8 Ma enhanced clay mineral formation and development of authigenic smectite in paleo-plains on the southern side of the Himalaya.