Abstract: Mahu sag in Junggar basin is proved to be rich of oil and gas, and famous for its Permian and Triassic oil and gas pools in sandy conglomerate fans. To discuss the tectono?depositional setting for the development of fan bodies is an important clue to explore the coupling among the tectonic, the climatic, and the geomorphic processes, is a foundation for appraisal of petroleum exploration potential, and an accelerator for petroleum exploration and development. Based on the newly-acquired drilling and geophysical exploration data, the paper is to disclose the tectono?depositional setting during Permian to Triassic Period from a point of view of sedimentary source to sink concept. The study result shows that the Mahu sag is a depression of Carboniferous to Quaternary built upon the pre?Carboniferous folded basement. The Permian to Triassic saw its dominant period of sedimentary filling, and underwent such evolution processes as the post?orogenic extension during Late Carboniferous to Early Permian, the compression and thrusting during Middle Permian to Middle Triassic, and intra?cratonic depression in Late Triassic, during which alluvial fan, fan delta, and lake sedimentary systems were mainly developed. The episodic and breaking?forward thrusting, the priority transportation pathways made up of tear faults and lateral transfer zones and the arid environment controlled the large?scale fan delta systems in and around Mahu sag. It is an integrated petroliferous system with the Fengcheng formation mudstones in the extensional alkaline lacustrine facies as the excellent hydrocarbon source, the overlying fan deltas as the favorable reservoirs, and the Upper Triassic thick mudstone as the regional cap rock. The Mahu sag is of great potential for oil and gas, and has a board prospect for multi-layer stereoscopic exploration