The Phu Khanh Basin, offshore central Vietnam, is the only undrilled basin on the Vietnam margin of the South China Sea. Analysis of multichannel seismic data indicates that the Phu Khanh Basin follows a typical rift-margin development: faulted basement, synrift sedimentation, a breakup unconformity, and postrift sedimentation. Initial rifting probably began during the Late Cretaceous(?) or Paleogene. Rifting and uplift appear to have resumed or continued locally during the late Oligocene and early Miocene. The later part of basin development was dominated by subsidence. Postrift sedimentation evolved from a transgressive ramp phase to a regressive shelf-slope phase. During the transgressive phase, rising sea level provided favorable conditions for carbonate buildup development. The regressive interval contains a number of sequences composed of seismically resolvable lowstand, highstand, and rarely transgressive, systems tracts. These sequences are interpreted as third-order sequences superposed on second-order eustatic cycles. Principal potential source rocks are believed to be synrift lacustrine sediments. The synrift sediments may lie below the oil floor and probably are gas prone. In the postrift section, the transgressive interval and the starved, basinward portion of transgressive and highstand systems tracts within the regressive interval also may have source rock potential. Carbonate complexes, weathered basement, shallow-water sands, and basin-floor fans all have the potential to provide reservoirs. Potential traps include carbonate complexes, basement hills and associated anticlines, fault traps, and coastal sand traps. Hydrocarbon indicators, such as flat spots, amplitude anomalies, and gas chimneys with seeps, occur at a number of locations.