In order to further investigate paleoclimate evolution of Cenozoic period in the southern margin of Junggar Basin, the authors systematically analyzed mineral compositions and mineralogical characteristics of palygorskite of mudstones and sandstones in the southern margin of Junggar Basin by using X-ray diffraction (XRD) and scanning electron microscopy (SEM). The results show that mineral compositions of Cenozoic mudstones are smectite, illite, palygorskite, kaolinite and chlorite. Palygorskite is indicative of an arid, semi-arid and strong evaporation environment. Fibrous or beam palygorskites identified by mineral contact relation are typically authigenic. The arid paleoclimate is consistent with the color change of strata reflected by illite and chlorite mineral assemblages.