This paper presents outcrop, petrographic, geochemical, well log and seismic data which together characterise the third-order T-7(8) unconformity located between the carbonate-dominated Lower Ordovician Penglaiba and Yingshan Formations in the Tarim Basin, NW China. Unconformities in Lower Palaeozoic carbonates in this basin are of increasing interest because major reserves of hydrocarbons have recently been discovered at the North Slope field (> 1000 x 10(6) brls oil and approximate to 3050x 10(8) m(3) gas). The reservoir here consists of karstified Lower Ordovician carbonates bounded by a third-order unconformity. The T-7(8) unconformity in Tarim Basin represents a short-term exposure surface (< 1 Ma) controlled both by sea-level changes and by palaeogeographic location within the basin, and the intensity of karstification varies laterally. The unconformity has had a major influence on porosity development in the underlying Penglaiba Formation carbonates. At two measured outcrop sections at the NW basin margin (Penglaiba and Shuinichang), dissolution porosity was observed in karstified and dolomitised carbonates below the T-7(8) unconformity surface. A seismic profile shows the presence of reflection anomalies below the unconformity which are interpreted as karst-related palaeo-caverns. Geochemical data indicate that the T-7(8) unconformity is associated with anomalies in stable isotope ratios and in heavy mineral and trace element profiles. Thus there are negative excursions in C-13 and O-18 ratios within the carbonate rocks immediately below the unconformity surface. Similarly, concentrations of major and trace elements such as Li, K, Ti, Rb, Th, Sr, V and Ni are significantly reduced in the underlying carbonates, while there is an anomalously high content of haematite-limonite.