The Dananhu coalfield, at the southern margin of Turpan-Hami Basin, Xinjiang, has good coal-forming geological conditions. Due to the low research level on the depositional environment and coal accumulation, the comprehensive coal mining is restricted. Based on drilling and sectioning outcrop data, the depositional characteristics, lithofacies, paleogeography, and coal accumulation of the coal-bearing formations in western Dananhu coalfield are analyzed. The middle member of the Xishanyao Formation is the major coal-bearing strata of the Dananhu coalfield, composed of conglomerate, sandstone, siltstone, mudstone, and combustible organic rock, which can be further subdivided into 14 lithofacies according to substance composition, sediment texture, and structure. During the early Middle Jurassic coal-accumulating period, alluvial fan, fluvial plain, fluvial delta, and shallow lacustrine deposits were developed from northeast to southwest in the western Dananhu mining area. Coal accumulation was most developed in the center regions of the study area extending from northeast to southwest, which were primarily concentrated in margin fans, floodplains, interdeltaic bays, and lakeshore environments, especially the transitional zone between the fluvial plain and the delta plain in the west of No. 1 mining area. This coal accumulation was mainly controlled by synsedimentary tectonic subsidence and clastic sediments supply or sedimentary environment, where tectonic subsidence was the primary controlling factor and the source supply was the secondary controlling factor for coal accumulation, which provided theoretical support for the coal prediction and geological exploration in western Dananhu coalfield.