Abstract: The Palaeogene strata are interpreted to be potential target strata for hydrocarbon exploration in the Junggar Basin, Xinjiang. The present paper presents a preliminary study of hydrocarbon-generating potential and oil and gas sources in the Palaeogene strata in the Basin. The results of research show that the mudstones as source rocks occur in quantities and scales in the Palaeogene strata, and are characterized by moderate to higher total organic carbon contents, oil-prone I-type and II-type organic matter, and immature to mature levels in the Junggar Basin. The oil and gas appear significantly in the deeper-seated Palaeogene source rocks in the southern Junggar Basin, and are controlled by source rock maturity and deposition. The future oil and gas exploration in the Junggar Basin should be focused in the southern Junggar Basin, especially in the Sikeshu depression. The results of research in this paper may provide a useful reference for the research of the world-wide Palaeogene petroleum systems.