Abstract: The Xihu Sag is the most important oil-bearing sag in the East China Sea Continental Shelf Basin, in which prevailed the Late Eocene source rocks of the Pinghu Formation, which was formed while the sag was situated in a transitional stage from faulting to depression. The Pinghu Formation is a set of marine-continental transitional coal-bearing sequence deposited in a semi-enclosed depositional environment of a bay. The authors systematically studied the distribution pattern, source of parent material and hydrocarbon generation characteristics of the coal-bearing source rocks. The results show that the coal-series source rocks were distributed widely in the sag and formed in a faulting-depression transitional stage. They are rich in iso-seasones and wet fern-derived β-bentane, reflecting a source from dried coniferous gymnosperms, in which diterpenoids are characterized by an increase in β-flatane from the slope zone to the center of the depression. From the microstructure, it is a kind of resin-rich coal-based source rock, which generated oil in early stage but gas in late-stage. The distribution pattern of " Gas in the East and Oil in the West” in the Xihu Sag is also determined by the distribution pattern, parent material source and hydrocarbon generation characteristics of the source rocks.