The impact of marine incursions during transgression (i.e., sea level rises and the shoreline moves landward) on the formation and quality of lacustrine source rocks is an important and contentious issue. In this study, we present a case study of the Paleogene Hetaoyuan Formation in the Biyang sag, Nanxiang Basin, eastern China. Paleontological, trace-element, and biomarker data indicate that the Hetaoyuan source rocks in this region were influenced by a marine incursion. The paleontological evidence indicates that the marine incursion resulted in the introduction of red and brown algae, which commonly inhabit marine environments. Trace-element analyses yielded representative evidence of marine incursion (e.g., equivalent boron content >300 ppm and B/Ga ratio >4.2). Biomarker evidence for marine incursion includes C-26/C-25 tricyclic terpanes ratios of 1:3, which is the threshold for distinguishing marine organic matter from lacustrine. Using the B/Ga ratio as a typical paleosalinity indicator, it was determined that the influence of marine incursion decreased from the Biye 1 to Cheng 2 to An 3006 wells, with the B/Ga ratio average decreasing from 7.51 to 6.81 to 3.73, respectively. With an increasing extent of marine incursion (e.g., distance landward, overall water depth, and marine-freshwater mixing), the primary productivity of organic matter increased, and the preservational environment became more reducing. These changes resulted in higher contents of organic matter (total organic carbon = 2-8 wt. %) and a more favorable type of organic matter for oil generation (kerogen type I-II), indicating that the marine incursion had a positive effect on the formation of source rocks. Therefore, the formation mechanism of high-quality source rocks in coastal lacustrine basins during high sea-level periods and associated resource potential might need to be reevaluated (e.g., the Campanian lower Neslen Formation along the margins of the Western Interior Seaway of North America and the terminal Oligocene-early Miocene in the fluvial Saldanha Bay at the southwestern tip of Africa). The results also provide useful data for regional oil and gas exploration.