Abstract: Dongying-Huimin Sag is located in the south of Jiyang Depression of the Bohaiwan Basin. Commercial oil and gas has been found in the Palaeocene and Lower Eocene Kongdian formation. Hydrocarbon potential of Kongdian formation is closely related to the Early Tertiary basin prototype that controlled formation of oil and gas reservoirs. Based on analysis of tectonic evolution and sedimentary facies, prototype basin in that period was recognized as an extending half graben that was faulted in the north and onlapped in the south. The major controlling faults included the north-northeast struck Ningnan fault, the western part of Wunan fault and Chennan fault. The Shicun fault, the east part of Chennan fault and Wunan fault that struck to northwest have also played a great part. The influence of northwest direction structures was more obvious in the east and in the early period than that in the west and in the later stage. The geodynamic background of prototype basin development of Dongying-Huimin sag was the sharpening uplift of upper mantle resulted from the subduction of Pacific plate to Eurasian plate, the conversion of continental margin of east Asia from Andean type to west Pacific type, and the shift of Tancheng-Lujiang fault belt from left-lateral strike-slip to right-lateral strike-slip.