Evidence is presented that the redbeds of the Preuss sandstone grade westward into fossiliferous, near-shore, marine sandstones and limestones. The red sandstones and salt beds in the Preuss sandstone are considered to have formed in a series of highly saline lagoons bordering a large island that arose from the sea in the area of Montana during middle Callovian time and nearly severed the southern part of the sea from marine waters in Canada. Lateritic soils developed on the island were the main source of iron oxide and sands comprising the Preuss sandstone. Redbeds similar to the Preuss sandstone were formed in a similar manner in the sea along the southern and eastern margins of the island. It is inferred that the climate on the island was warm and seasonally humid. The Preuss sandstone was formed during only part of the upper Callovian and at about the same time as the redbeds at the base of the Upper Jurassic in the Gulf region of the United States and Mexico.