Through ICP MS analysis,measurements of rare earth element and trace element arc conducted by using 30 mudstone samples in the I.ower Permian Shanxi Formatio,south of Yanchuan area,for the re search on REE geochemical characteristics and its geological application. The result shows that the amount of ∑REEofmudstone (93.80 to 746.47×10^- 6) is high. The ratios ofzv(LREE/ HREE) (1.28 to 9.92) and (Im/Yb)N(1.97 to 28.78) show that the differentiation of LREE and HREE is significant. The corre- lation between Z REE and external elements, like Ti, Ni, Pb, Rb, Ga, Cr, Zn, is very good, while the correla- tion between ∑REE and the marine elements,like Zn and Mn,is not obvious,which indicated that REE is mainly supplied by terrigenous minerals. The Ce (-0. 089-0. 138,more than --0.10)and δCe(0.91 1.35, average 1.09) show that the water environment in the study area in Shanxi Formation is anoxic reduction. The distribution patterns of REE and ∑REE-(La/Yb)N diagram show that the source rocks of samples mostly consist of granite,sedimentary rock and may be multi-source. And analysis result shows that the di rection of source is coming from the north of the studied area,which may be the active continental margin uplift basement sources and a small part of continental island arc magmatite provenance. Moreover,there is a relationship between the sequence boundaries (SB1, SB4) with the abnormal surfaces of ∑ REE, (La/ Yb)N ,δCe,V/(V+Ni),V/Cr trace and REE geochemical characteristics near the sequence boundaries.