The detailed depositional systems and basin evolution of Lower Cretaceous coal-bearing strata in the Erlian Basin of northeastern China were analyzed based on extensive borehole and outcrop data. A total of 7 facies associations are interpreted and consist of 14 distinct lithofacies, with lithologies including conglomerates, sandstones, siltstones, mudstones, shales, and coals. Five third-order sequences were recognized, and their internal lowstand, transgressive, and highstand systems tracts were defined based on six key sequence stratigraphic boundaries. These boundaries were represented by regional unconformities, basal erosional surfaces of incised valley fills, interfluvial paleosols, and abrupt depositional facies-reversal surfaces. Sequences I–V correspond to the rift-initiation stage, the early-rift climax stage, the late-rift climax stage, the immediate postrift stage, and the late postrift stage of the basin, respectively. The preferred sites for coal accumulation were braided fluvial delta plain, meandering fluvial delta plain, and littoral–shallow lake environments. The major coal seams formed during the early and late transgressive systems tract of sequences III, IV, and V, which were well developed in the eastern, northeastern, and northeastern parts of the Erlian Basin, respectively. Three coal depositional models were summarized in the sequence stratigraphic framework, including types 1, 2, and 3, corresponding to the Newark type, Newark–Richmond type, and Richmond type, respectively. These coal depositional models were closely related to the basin evolution. These results could provide preferred depositional environments and favorable areas of coal and coalbed methane (CBM) for the exploration and development of coal and CBM in the Erlian Basin, with the Jiergalangtu, Huolinhe, Baiyinhua, and A’nan sags recommended as the key sags.