Sedimentary organic matter concentrated in source rocks forms the main source for the formation of hydrocarbons. Its deposition and preservation are strongly controlled by the depositional environment and paleoclimate. This study evaluates the paleoenvironment and the paleoclimatic controls of sediments in the Middle Miocene Balikpapan Group, Mahakam Delta of the Lower Kutai Basin, Indonesia. The sedimentary succession of the Mentawir Formation, encountered in three wells (MHK 1, MHK 3, and MHK 4), contains interbedded sandstones, siltstones, shales, and coal. Gamma ray log analysis has revealed four facies associations: (a) funnel-, (b) bell-, (c) cylindrical-, and (d) bow-shaped patterns, which, together with sedimentological and mineralogical analysis, suggest a fluvio-deltaic depositional environment during the Middle Miocene in the study area. Sedimentary successions from wells MHK 1 and MHK 3 comprise interbedded sandstone and siltstones and are interpreted to represent repeatedly occurring delta plain, delta front, and prodelta deposits. The succession encountered in well MHK 4 mostly consists of amalgamated sandstones and indicates a predominantly fluvial to upper delta plain environment with distributary channels and crevasse splays interbedded with only thin delta front deposits. X-ray diffraction–clay fraction analysis shows that the <2 μm clay-sized fraction consists of kaolinite (38%–67%), illite (14%–29%), chlorite (2%–17%), and mixed-layer illite/smectite (I/S) (14%–30%). Kaolinite formation and abundance indicates a hinterland climate classified as type Af (tropical rainforest) and intensive chemical weathering conditions in the source areas related to tropical to sub-tropical climates with high precipitation. Under such climatic conditions, kaolinite and I/S mixed-layer minerals are preferentially formed because the characteristic ions, K+, Na+, Ca2+, and Fe2+, are leached away. Thus, the production, transport, distribution, and preservation of sedimentary organic matter in the onshore Mentawir Formation of the Balikpapan Group are predominantly controlled by the humid tropical climate and fluvio-deltaic processes.