Interior layered deposits (ILDs) within western Candor Chasma were studied by mapping lithologies, measuring layer attitudes and comparing the stratigraphy of two adjacent mounds. Layering tends to dip in the same direction as the local topographic slope, although at different angles. Regionally consistent attitudes do exist, suggesting postdepositional block rotations. The stratigraphy of two adjacent mounds correlates, but the thicknesses of the units differ. Most layered material appears to have been deposited conformably, with one late major unconformity. Several fault populations are identified and correlate well with regional faults associated with the formation of Valles Marineris. The data suggest that here the ILDs predate the faulting and may be early basin fill. According to our model for ILD formation, ILDs are deposited syntectonically during early basin collapse. Subsequent subsidence of surrounding areas, accompanied by little or no sedimentation, left the early deposits as individual mounds, remnants of the former subbasins. Stratigraphic differences between mounds resulted from different subsidence rates of subbasins. A significant change in depositional environment, from depositional to a near cessation of deposition and the onset of a major erosion event, possibly coincided with the opening of the main Valles Marineris troughs. We further suggest that groundwater played an important role in the formation of sulfates. The youngest unit identified, not including surficial deposits, is likely the result of a posttectonic, regionally limited volcanic event. If basin collapse continued following the cessation of deposition, this model can also account for mounds within closed basins, such as Hebes.