A set of nodular limestones was developed in the first member of the Middle Permian Maokou Formation (denoted as the Mao‐1 member) in the south‐eastern Sichuan Basin, south‐west China. Borehole coring has shown excellent signals of oil and gas from the Mao‐1 member carbonates, and many drilling wells have obtained industrial‐level gas flow. To assess the natural gas exploration potential of the Mao‐1 member in this area, sedimentary characteristics of drilling cores are described, and the formation mechanism of natural gas reservoir and its key controlling factors are also evaluated using data obtained from field geological survey, core observation, and laboratory experimental analysis. On this basis, the process of natural gas accumulation and evolution is examined. The results show that the Mao‐1 member nodular limestone comprises abundant marls and packstone to wackestone, and they were deposited in a lower part of the carbonate ramp setting. The marls exhibit rather high organic‐matter abundance and hydrocarbon generation capacity. Natural gas is mostly enriched in the marls developed talc diagenetic shrinkage pores and a certain number of organic‐matter pores, and their reservoir properties are much better than that of packstone‐wackestone. The natural gas in the Mao‐1 member is mainly self‐generated oil pyrolysis gas. The gas reservoir is characterized by the co‐existence of source rocks and reservoir, a lithology‐controlled reservoir, and a structure‐fracture‐controlled enrichment mechanism. Organic‐matter‐rich marl constitutes the material basis for natural gas accumulation. Talc diagenetic shrinkage pores provide storage space for natural gas. Preservation conditions are the key to natural gas accumulation, and natural fractures are beneficial to high gas production. The gas reservoir is characterized by early intraformational enrichment and late interformational adjustment. The finding of the nodular limestone gas reservoir of the Mao‐1 member provides new insights into unconventional gas exploration in the Sichuan Basin, and shows great potential for increasing natural gas reserves and production in China.