Studies initiated in the search for domestic energy supplies for Ethiopia have confirmed the presence of oil shales in the Yayu Basin. This article presents some of the characteristics of these shales. The basin is located in the southwest of Ethiopia and consists of Precambrian basement and Cenozoic volcanic and sedimentary rocks. Three sedimentary successions reach a cumulative maximum thickness of 165 m (541 ft). Two oil shale horizons have been identified in the upper and lower sedimentary successions and reach a maximum thickness of 35 and 20 m (115 and 65 ft), respectively. Sedimentation in the basin occurred in fluvial and lacustrine depositional environments. The sandstone facies was deposited in a fluvial environment, whereas the oil-shale-bearing sediments were deposited in a lacustrine environment. Algal amorphous materials and minor amounts of woody materials characterize the studied oil shales with Botryococcus and Pediastrum, indicating a lacustrine environment. The studied oil shales are characterized by high total organic carbon values up to 61.2% and S2 (hydrocarbon-generating potential) values ranging from 10.78 to 119.07 HC g/kg, indicating excellent source rocks. Most of the oil shales are at the immature to early mature stage for hydrocarbon generation. Vitrinite reflectance measurements on the oil shale samples are less reliable because of the presence of abundant algal materials. Gas chromatogram results also indicate source rocks. The Yayu Basin is estimated to have up to 1 billion metric tons of oil shale reserves.