The Tiniusaer oil shale, located in the northern foot of Bogda Mountain, was deposited in the Lucaogou Formation in the Upper Permian. In this paper the effect of paleostructure, paleoclimate and sedimentary environment on the mineralization of oil shale in the study area was investigated. The results show that the Jimusaer oil shale was developed in the stable paralic lacustrine basin formed in the Late Middle Permian, and cropped out with the uplift of Bogda Mountain during the Himalayan orogeny. The Lucaogou Formation, which is composed of six lithologic segments, was deposited in a warm humid to dry hot climate and fresh to brackish water environment indicated by values of Sr/Cu, Sr/Ba and Mn/Fe ratios, which vary segment by segment. There are also similar variety regularities shown, which implicate that the changes of paleoclimate influenced directly water salinity in the study area. The Lucaogou Formation includes two oil shale segments which were developed respectively in the shallow to semi-deep lake and semi-deep to deep lake, and the environment of large-area, moderate saline deep water provided favourable conditions for generation and preservation of oil shale.