The Permian Qipan Formation (P1-2q) is the aim horizon for hydrocarbon source rocks in the piedmont area of southwestern Tarim Basin. In the present study, the depositional environment and geochemical characteristics of muddy hydrocarbon source rocks of P1-2q were systematically evaluated using total organic carbon (TOC), Rock-Eval pyrolysis, vitrinite reflectance (Ro), reflected light microscopy, main and trace element, and biomarker parameters of 167 outcrop samples and 176 core samples. The TOC of P1-2q is primarily concentrated within the range of 0.36% to 2.77%, with an average of 1.58%. This suggests that the overall evaluation of the hydrocarbon source rock is fair to good. The source rocks of P1-2q predominately contain Type III and Type II2 kerogen. The overall Tmax values of P1-2q hydrocarbon source rocks are notably elevated, with the majority exceeding 490 °C or falling between 455 °C and 490 °C. The Ro value is between 0.90% and 2.00%, indicating that the maturity has reached a high, over-mature evolutionary stage. The trace element and biomarker parameters indicate that hydrocarbon source rocks of P1-2q are predominantly slightly oxygen-rich, with a minor anoxic component. The asymmetric ‘V’ arrangement of the C27-C29 regular steranes indicates that the hydrocarbon parent material is predominantly derived from algae or aquatic organisms, with varying degrees of mixing with organic matter of terrestrial origin. The study of source rock geochemistry of the P1-2q makes the exploration target of the southwest depression of the Tarim Basin more accurate in the complex tectonic geological environment.