The Lishui Sag is located in the southeastern part of the Taibei Depression, in the East China Sea basin, where the sag is the major hydrocarbon accumulation zone. A three dimensional modelling approach was used to estimate the mass of petroleum generation and accumulated during the evolution of the basin. Calibration of the model, based on measured maturity (vitrinite reflectance) and borehole temperatures, took into consideration two main periods of erosion events: a late Cretaceous to early Paleocene event, and an Oligocene erosion event. The maturation histories of the main source rock formations were reconstructed and show that the peak maturities have been reached in the west central part of the basin. Our study included source rock analysis, measurement of fluid inclusion homogenization temperatures, and basin history modelling to define the source rock properties, the thermal evolution and hydrocarbon generation history, and possible hydrocarbon accumulation processes in the Lishui Sag. The study found that the main hydrocarbon source for the Lishui Sag are argillaceous source rocks in the Yueguifeng Formation. The hydrocarbon generation period lasted from 58 Ma to 32 Ma. The first period of hydrocarbon accumulation lasted from 51.8 Ma to 32 Ma, and the second period lasted from 23 Ma to the present. The accumulation zones mainly located in the structural high and lithologic-fault screened reservoir filling with the hydrocarbon migrated from the deep sag in the south west direction.