Reservoir evaluation of shaly formations and enhancement of reservoir characterization has long been a difficult task. This study is devoted to developing relationships for interpreting the combined effects of subsurface stress and shale on petrophysical propel-ties of reservoir rocks. These new relationships are used to: (1) identify shale types, (2) characterize flow units in shaly formations using in situ measurements, and (3) study the effect of stress on reservoir quality index and fluid Bow paths of shaly formations. Several flow unit models have been developed to achieve these goals, The proposed flow unit models are based on current;shale models appearing in the literature. These flow unit models introduce unique parameters for reservoir characterization of shaly formations. These parameters include the slope of a straight line (that defines the flow unit) and the stress factor on a log-log plot of in situ reservoir quality index versus in situ porosity of the shaly formations. Finally, these models are used to identify shale types and select a suitable water saturation model for shaly formations, The models are validated using simulated data of porosity and pressure, The new models, in combination with the methodologies developed in this study, represent an effective tool for an enhanced reservoir description of shaly reservoirs.