Lacustrine deep-water fine-grained sedimentary rocks are characterized by high heterogeneities in lithology and lithofacies stacking patterns, controlled by sediment supply and lake level fluctuation. Despite their vital roles as source and reservoir rocks of unconventional oil and gas play, depositional processes and sedimentary sequence of lacustrine fine-grained sedimentary rocks are poorly understood compared to their extensively studied deep marine counterparts. Here, we studied lithofacies, transportation and depositional processes, depositional environments, and sedimentary cycles of deep-water fine-grained deposits of the Lower Oligocene Xiaganchaigou Formation from cored wells in the western Qaidam Basin. Nine lithofacies that stack repetitively in 6–18 m thick sedimentary cycles are identified based on petrographic observation, geochemical analysis, and scanning electron microscopy. The regressive systems tract of a sedimentary cycle is composed of detrital-rich massive fine sandstone deposited by debris flows and thin-bedded fine sandstone deposited by high-density turbidity currents. The transgressive systems tract is dominated by laminated carbonate-rich mudrock facies deposited by low-density turbidity currents. A complete sedimentary cycle is interpreted to represent a transgressive-regressive cycle controlled by fifth-order lake-level variation. Coarse-grained detrital-rich debrite and high-density turbidite were deposited in the proximal sublacustrine fan and channel during lake-level regression, with sediments mainly supplied by terrigenous siliciclastic input. Carbonate-rich low-density turbidites are deposited primarily in the distal sublacustrine fan during lake-level transgression. Thin-laminated carbonate-rich mudrock facies with high organic matter abundance and well-developed laminae-induced fractures are considered both source rocks and target reservoirs of the upper Xiaganchaigou Formation.