Based on the comprehensive research on geochemical characteristics of shale of Lucaogou Formation along the Baiyanghe profile in the northern Bogda Mountain in Xinjiang, the authors investigated the elements distribution and depositional environment of shales of Lucaogou Formation, source characteristics and tectonic setting of the source area. Some conclusions have been reached: ① Baiyanghe shale is evidently enriched in phosphorus, which is ascribed to the development of the volcanic ash, as indicated by the tuffaceous composition of the interbedded mudstone and carbonate layers. ② In comparison with the average concentrations of worldwide shales, the Baiyanghe shale is enriched mainly in Li, B, Pr, Tb, Dy, Ho, Er, Tm and Lu, and depleted in other elements relative to their average values. ③ Geochemical characteristics reveal that there occurred climate change from warm humidity to dry heat from the bottom to top of Lucaogou Formation, which caused the change from freshwater to saltwater and strengthened gradually the reducing environment from the bottom to top of Lucaogou Formation. ④ The source area was under the low-moderate chemical weathering condition. The provenance of shales was mainly felsic igneous rock, followed by femic igneous rock. ⑤ The tectonic setting of the source area was a continental island arc-active continental margin.