This thesis examines the changes in the microstructure of clays and mudrocks due to the influence of the environment of deposition and subsequent compaction. A sedimentary model is proposed in which the development of fissility in shales and the formation of hydrocarbon source rocks are attributed to the chemical conditions at the time of deposition. The geotechnical properties of fresh sediments are considered and the ability of the depositional environment to affect these properties is assessed. From a SEM analysis of mudrocks it is shown that there is a correlation between microstructure and the conditions at the time of deposition. organic-rich shales formed in anoxic environments are characterized by a preferred orientation of microstructure. Mudrocks formed under oxic conditions show a random orientation. This characteristic fabric of shales results from the peptizing capability of certain organic compounds in the environment of deposition and is considered to be a contributing factor to the development of fissility. A laboratory simulation of the depositional environment is described. Test results show that pure clays sedimented with organic compounds in a marine environment exhibit an increased parallelism of particles compared with those without organic compounds. A mechanism is described whereby the organic compounds are adsorbed onto the clay particle surfaces and promote peptization. The fabric of sediments obtained under laboratory conditions is found to control the rate of consolidation. Clays with a preferred particle orientation have slower rates of water loss and this is suggested to be an important factor with respect to the formation of under-compacted mud rocks. Statistical methods applied to the analysis of directional data obtained from SEM micrographs are reviewed and a measure for the anisotropy index of mudrock microstructure is proposed.