The study of the palaeoenvironment of the Early Cretaceous has been a significant research topic, largely due to the "Jehol Biota" in western Liaoning and the important prospect of fossils in Dakangpu Layer. Based on the sedimentology of Dakangpu Layer, it is helpful to get a deeper understanding of the living environment of the "Jehol Biota." Varves are highly developed in the Dakangpu Bed of lower Cretaceous Yixian Basin in western Liaoning, China, supplying reliable and high‐quality proxies to explore the palaeoclimate. This paper reconstructs the palaeo‐lake environment and palaeoclimate, using petrography, facies associations, varves components, and geochemistry. Detailed petrographic studies helped to recognize 11 lithofacies which were grouped into two facies associations: Shallow lake and deep to semi‐deep lake sequences. The delicate structure of varves in the Dakangpu Bed were divided into two categories: Clastic and endogenic. Additionally, two sub‐types of clastic varves have been discovered, with distinct components, thickness, and distribution in vertical sequence. Nineteen representative samples of varves reveal that rare earth and trace elements have a similar change trend. The composition, formation, and preservation of the varves in the Dakangpu Bed depicted a deep lake, with stratified water and oxygen‐depleted bottom layer environment. The U/Th ratios and V/Cr ratios are in the ranges of 0.37–1.55 and 0.97–10.47 respectively, supporting the redox environment's minor fluctuation. The varve thickness, flood frequency, sporopollenin collections, and geochemical data indicated that precipitation and humidity decreased gradually in the sedimentary period, and the climate changed to warmer and drier, with fluctuations in the middle to later periods. [ABSTRACT FROM AUTHOR]