Owing to the high hydrocarbon content and photosynthetic efficiency of phytoplankton, planktonic microalgae account for the main source of petroleum hydrocarbons in marine and continental petroliferous basins. Therefore, the presence of algal residues in such basins is considered an important indicator of high-quality hydrocarbon source rocks. The southwestern region of the Qaidam Basin, characterized by lacustrine deposits from the Paleogene, has substantial petroleum resources. However, studies on the development of source rocks and the mechanisms involved in their organic matter enrichment are insufficient, thus hampering ongoing shale oil exploration efforts. Herein, abundant Botryococcus fossils were discovered in the main source rocks of the upper member of Xiaganchaigou Formation of Paleogene in Southwest Qaidam, accounting for >50 % of the total organic matter content. The palynofacies assemblages reflected relatively distal and oxygen-rich sedimentary environments. The algae-rich rocks usually exhibited distinctive laminated structures alternately composed of quartz-feldspathic, clay and carbonate laminae, indicating periodic climate fluctuations. The Botryococcus, which was mainly preserved in the coarse-grain quartz-feldspathic laminae, probably reflected heavy precipitation conditions and subsequently high nutrient inputs. Finally, the oxygen-rich, low salinity and eutrophic water was likely taking form which benefit the growth of these hydrobiontic algae. These algal-rich shales exhibited typically high hydrogen index (IH) and total organic carbon (TOC) values, indicating their high hydrocarbon-generation potential. Thus, they are important marker beds for high-quality source rocks in petroliferous basins. Concurrently, the coarse-grained detrital mineral laminae displayed excellent reservoir physical properties, probably providing sufficient reservoir space for planktonic algae-derived liquid hydrocarbon. Therefore, these Botryococcus-rich source rocks might represent important targets for ongoing shale oil exploration.