Based on the research of outcrop and underground data, four 3-order sequences are recognized in the Yanchang Group of Upper Triassic in Shaanxi that is continental clastic sediment composed of fluvial and lacustrine system. The first one is lacustrine sequence while others are fluvial ones. According to the surfaces and genetic units of sequence, stratigraphic sequence can be divided into three part: Low Stand System, Transgressive System and High Stand System. The fluvial sequence develops overflow and marshy sediments during maximum flooding period while the lacustrine sequence develops dark shale. Sequence boundary is the key to recognize sequence on which develops thick multi-storey sandstone. To determine the sequence boundary is challenge because the fluvial surface is so normal in continental sediments and using comprehensive ways is necessary. The main controls of sequence formation is tectonics and climate change in continental sequences. Sequence controls development of petroleum accumulation. This is clear in three aspects: the control for the assemblage of source, reservoirs and caps, the control for distribution of reservoirs and the control for performance of reservoirs.