The Piceance Creek basin formed as a continental foreland basin ca 53 to 48 Ma in the early to middle Eocene. On a global basis, the basin contains one of the richest oil shale resources known, where the profundal oil shale deposits, kerogen-rich mudstones (clay and carbonate), exist over most of the basin. Despite its economic importance, the evolution of the Piceance Creek basin is still somewhat unclear. Based on facies association analysis, depositional trends, and gamma ray and Fischer assay data, six evolutionary lake stages are recognized: (i) fresh lake; (ii) transitional lake; (iii) highly fluctuating lake; (iv) rising lake; (v) high lake; and (vi) closing lake. Lake stages are composed of depositional units and characterize large-scale changes in sedimentological patterns, depositional trends and fluctuations in the oil shale richness related to changes in climate and tectonics. Lake stage evolution is also consistent with the global Eocene climate trend. Stage 1 formed prior to the Eocene climate optimum. At the beginning of the Eocene climate optimum, a saline-restricted lake formed (Stage 2) and evolved into the highly fluctuating lake (Stage 3) indicating rapid climate changes during the peak of the Eocene climate optimum. This stage was followed by the rising and high lakes (Stages 4 and 5) after the climate optimum and during a change to a more humid climate. The closing of the lake (Stage 6) was caused by increased sand input from the north, indicating the influence of both tectonics and climate. Based on depositional trends and climate evolution, it is suggested that, during the arid climate, laterally heterogeneous highly cyclic depositional units dominate, whereas, during the humid climate, depositional units form laterally continuous sediments that can be traced over long distances.