The Paleocene-Eocene Thermal Maximum (PETM, ∼56 Ma) marks a rapid, intense warming event at the Paleocene-Eocene boundary. However, the terrestrial record of the PETM is limited, and its paleoenvironmental impacts are debated. This study examines the effects of the PETM on terrestrial lake environments using mineralogical, inorganic and organic geochemical analyses of the Paleocene Kongdian Formation’s organic-rich rocks from the Bohai Bay Basin. Findings show that global PETM warming drove regional aridification and evaporation, while carbonate isotopic signals (negative δ13C, positive δ18O) are consistent with enhanced hydrological cycling and salinity fluctuations, reflecting the interplay between global climate forcing and local hydrological responses. Nutrient influx during the PETM boosted paleoproductivity. Arid-adapted organisms like Podocarpidites and Ephedripites also became present. The PETM experienced heightened seasonal variance and climatic extremes, with elevated temperatures causing increased evaporation and salinity during dry seasons, indicating greater aridity. Seasonal precipitation likely intensified due to monsoonal rains or the tropical convergence zone’s northward movement. Pollen from the Bohai Bay Basin indicates both significant episodic precipitation and increased aridity, reflecting complex climatic interactions. Increased detrital kaolinite content during the PETM suggests intensified physical weathering and erosion in kaolinite-bearing catchment areas, driven by episodic heavy rainfall. Our sedimentological observations (e.g., laminated shale cyclicity and detrital mineral assemblages) indicate sporadic heavy rainfall events, enhancing physical weathering and altering detrital sediment mineral content in the Bohai Bay Basin.