Liaoxi Sag that locates in the west of Liaodongwan Bay of Bohai Sea Area is a half graben-like sag in the Palaeogene. The exploration degree of the mid-southern Liaoxi Sag is the lowest in Liadongwan Bay. The paper focuses on the analysis of structure-sequence stratigraphic framework, sedimentary system and palaeogeography of the Palaeogene in the area. The base topographic form of the sag in the cross section of the mid-southern Liaoxi Sag is irregularity in the Palaeogene. There is an inherited isolated-island in the sag. The distribution of island is chained-like shape, so it is called as chained-like island. The mid-southern Liaoxi Sag in the Palaeogene is divided into two sub-sags by the island, viz, Eastern Sub-sag and Western Sub-sag. The island controls the distribution of sedimentary system in the sag in the Palaeogene. The sedimentary systems on the two sides of the island are obviously different. The structure framework in the axial section is more complex than one in the cross section. According as the drilling wells data and the seismic data, 6 sequence boundaries and 5 sequences can be recognized in the Palaeogene in the mid-southern of Liaoxi Sag. The paper described in details the genesis and the seismic and response logging curves characteristics of the boundaries and the composing of system tract in each sequence. The palaeography characteristics of the different sequences were delineated in the structure-sequence framework in the paper. The sedimentary systems distribution in Palaeogene in the area is regularity. In the west of the sag, the major sedimentary systems are alluvial fans, braided river and delta plain, toward the eastern sag, the major systems are delta front and shallow lacustrine. The palaeogeography development in Palaeogene in the mid-southern Liaoxi Sag is controlled by these factors such as sequence boundaries transition, striking-slip structure, palaeo-geomorphology, and palaeo-climate, etc. The control of the above four factors on the deposition of the basin is not isolated but associated with each other. The major factor is different in different development stages. The periodic changes of the palaeo-climate controls the lacustrine expanding and constricting, the structure controls the efficacious accommodation, the base levels of deposition and erosion and lake level not only control the supply rate of clastic debris, but also control the depositional rate of the basin.