Coal petrologic and mineralogic investigations, along with proximate and Rock-Eval pyrolysis, were performed on samples from a borehole in the center of the Karlovo basin in order to determine the depositional environment of the Karlovo lignite, which formed during the transgressive stage of a tectonic graben. Several thin coaly layers represent the transition from a fluvio-deltaic to a lacustrine environment, but only the uppermost lignite seam, which is about 10-m thick, is considered (sub-) economic. The latter is characterized by medium to high ash yields and low sulfur contents. The coal formed in a rheotrophic, low-lying mire near a freshwater lake with low pH value. The acid environment resulted in low bacterial activity, low gelification, and low sulfur contents. Alumosilicates were altered to kaolinite, another consequence of the acidic peat water. During peat accumulation areas with open water existed in the central basin. Alginite-rich sapropelic sediments with (acidophilic) diatoms accumulated in these anaerobic ponds. Apart from the basin center, xylitic coal indicates a vegetation rich in decay resistant conifers (swamp forest). Relatively dry conditions were established during later peat-forming stages. This is indicated by lower ash yields and increased contents of fusinite and fungal remains. Peat accumulation was terminated by a major flooding event and the establishment of a lake. (C) 2005 Elsevier B.V. All rights reserved.