The Miocene lacustrine sequence exposed near Esquivias, in the central area of the continental Tertiary Madrid Basin, is formed of two main lithostratigraphic units that represent two different stages of a palaeolake system. Unit I consists of five lithofacies: (A) nodular carbonates and marls, (B) massive dolostones, (C) bioclastic limestones, (D) mudstones, and (E) chert, which are characteristic of sedimentation and early diagenesis in a shallow lacustrine environment. Two main stages of the same general lowstand situation are reflected in mineralogy and isotope geochemistry results. An initial stage is suggested by the presence of non-stoichiometric dolomite and trioctahedral smectites. High delta-O-18 and delta-C-13 values of the dolomites (+ 5.5 and + 2.9 delta-parts per thousand, respectively) indicate strongly evaporative conditions. A second stage is characterized by the presence of calcite, fibrous clay minerals and by generally lower delta-O-18 (from + 1.5 to - 6.5 delta-parts per thousand and delta-C-13 (from - 1 to - 9.8 delta-parts per thousand values for carbonates, which suggest more diluted waters during this lowstand phase of the lake. Unit II comprises seven lithofacies: (A) conglomerates, (B) intraclastic mudstones, (C) laminated marls, (D) massive mudstones, (E) diatomaceous marls, (F) laminated bioclastic limestones, and (G) root-bioturbated limestones. Both conglomerates and intraclast mudstones fill sharply eroded contacts in the underlying deposits of Unit I. We demonstrate how the arrangement of facies, supported by isotopic results from the carbonates delta-O-18 (from - 0.7 to - 7.2 delta-parts per thousand; delta-C-13 from - 4.2 to - 8.6 delta-part per thousand), is clearly indicative of deeper lake conditions. The basal reworked facies mark the initial phase of a lake transgression. In contrast with Unit I, the clay mineral assemblage from unit II is mainly detrital. Clay minerals thus also support the interpretation of a dilute water body, consistent with a highstand of the palaeolake.