Abstract: Xiariha depression is in the southern Qilian Basin with relatively low degree of geological investigation in oil and gas. There are four sets of source rocks in this area: Carboniferous dark mudstone, Caodigou formation Lower Permian dark mud shale, Garaefersi formation Upper Triassic dark mudstone and Jurassic dark mudstone. Triassic source rock is of favorable conditions for hydrocarbon-generating potential and shale gas considering its thickness, content and maturity of organic matter. The authors carried out comprehensive studies on the distribution of Upper Triassic mud shale, the abundance, type and maturity of organic matter, the mineral composition, the reservoir property and the gas indication etc. to further understand the hydrocarbon-generating potential of Upper Triassic shale in Xiariha depression with the help of geological survey wells and coalfield drilling. It is held that the Upper Triassic dark mud shale in Xiariha depression has the characteristics of wide distribution, large thickness, medium abundance of organic matter and good hydrocarbon generating potential in Type Ⅱ and Type Ⅲ. The content of brittle minerals are much higher in dark mudshale with the clay minerals of illite and chlorite, conducive to the accumulation of adsorbed gas and the formation of aractured fracture. Dark mudstone has good physical properties with mineral pore, secondary dissolution pores, organic pore and micro-fractures well-developed, providing good reservoir conditions. Furthermore, the abnormal indication of core samples suggests that shale gas in South Qilian Basin has hydrocarbon-generating potential and is worth exploring.