Mud depocenters play an important role in the sediment source–sink system of marginal seas; however, the factors controlling the formation of mud deposits are not well understood. This study focused on Core LHSD-1, which is located on the southern margin of the Shandong Peninsula mud wedge in the northwestern part of the South Yellow Sea. Elemental ratios, such as the C/S ratio (the mass ratio of total organic carbon and total sulfur) and Sr/Ba ratio, were used to track the changes in paleosalinity during the late Quaternary and to investigate the mechanisms that influenced the formation of the mud wedge off the Shandong Peninsula. Our results indicate that Core LHSD-1 likely recorded two transgression events, corresponding to MIS3 and MIS1. Following sea-level rise after the Last Glacial Maximum (LGM), transgressive deposition began in the study area at approximately 11.5 kyr BP. During the early Holocene, fluctuating water salinity was recorded by Sr/Ba ratios, which became stable at approximately 6.8 kyr BP when the sea level reached its highstand. At the same time, the modern current system was established, and a significant amount of terrestrial material, such as refractory organic carbon and iron, has been transported to the study area by enhanced coastal currents, which was documented by elevated C/S ratios (C/S > 2.8) in mud sediments. Our findings indicate that marine transgressions controlled the initial development of the mud depocenter and that the establishment of the modern ocean current system promoted the rapid deposition of mud sediments, which corresponded to the growth of global mud depocenters.