Oncolite is a kind of algae pack tablets composed of two parts, the core and cladding. It was the mucus secretion during the growth of algae in the process of capturing bonded debris materials and calcium carbonate particles and was formed through the core accretion as concentric patterned grains. On October 24, 2008, the authors found oncolites in Lower Cretaceous Naijiahe Formation of Liupanshan Group in a tunnel of Sikouzi Reservoir in the Liupan Mountain. The Lower Cretaceous strata in the study area are mainly composed of a set of purple, grayish green and gray mudstone, gray marl and light yellow muddy siltstone, with thin layered plaster between the marl. Oncolites occur in the upper part of Naijiahe Formation. A study of their external core and lamination characteristics suggests that they were formed mainly in a turbulent and high-energy water-environment. Geochemical compositions of the oncolites show that the debris was derived from land-based oxides such as SiO2, Al2O3, Fe2O3, and FeO, whose values are all relatively low, with SiO2 being 8.20%, Al2O3 being 2.77%, and (Fe2O3+FeO) being 3.00%. The content of these oxides in the lake depends on the amount of terrestrial detritus that entered the lake. In addition, the inflow of terrigenous detritus and vegetation cover are also related to the extent of weathering. The lower the degree of weathering or the better the covering, the lower the debris substance content. Therefore, the oncolites with relatively low SiO2, Al2O3, Fe2O3, and FeO values indicate that during the same period the climate was relatively dry and the weathering was not strong. As only a small amount of clastic materials flowed into the lake and the lake water was relatively clean, a suitable water environment for the growth of algae and concolites were formed, and this also implies the close relationship between the influx of terrigenous clastic rocks and the growth of concolites. CaO content of concolites reaches 48.18%, indicating an obvious effects of the capturing and adhesion of calcium carbonate particles. Calcified algae itself and in situ precipitation of micro-organisms might also have been the causes for the formation of these concolites. The Sr/Ba value is 4.87, and the CaO content reaches 48.18%, suggesting that in the study area concolites were formed in a high salinity, high temperature, hot and strong evaporation arid environment. In Early Cretaceous, the region was affected by the Yanshanian movement, resulting in crustal uplift and lake atrophy. A study of the formation environment of these oncolites in Liupanshan area shows that their formation environment was consistent with the tectonic setting at that time.