The laminated limestones of the Early Cretaceous Crato Formation of the Araripe Basin (North-eastern Brazil) are world-famous for their exceptionally well-preserved and taxonomically diverse fossil fauna and flora. Whereas the fossil biota has received considerable attention, only a few studies have focused on the sedimentary characteristics and palaeoenvironmental conditions which prevailed during formation of the Crato Fossil Lagerstätte. The Nova Olinda Member represents the lowermost and thickest unit (up to 10 m) of the Crato Formation and is characterized by a pronounced rhythmically bedded, pale to dark lamination. To obtain information on palaeoenvironmental conditions, sample slabs derived from three local stratigraphic sections within the Araripe Basin were studied using high-resolution multiproxy techniques including detailed logging, petrography, μ-XRF scanning and stable isotope geochemistry. Integration of lithological and petrographic evidence indicates that the bulk of the Nova Olinda limestone formed via authigenic precipitation of calcite from within the upper water column, most probably induced and/or mediated by phytoplankton and picoplankton activity. A significant contribution from a benthonic, carbonate-secreting microbial mat community is not supported by these results. Deposition took place under anoxic and, at least during certain episodes, hypersaline bottom water conditions, as evidenced by the virtually undisturbed lamination pattern, the absence of a benthonic fauna and by the occurrence of halite pseudomorphs. Input of allochthonous, catchment-derived siliciclastics to the basin during times of laminite formation was strongly reduced. The δ18O values of authigenic carbonate precipitates (between −7·1 and −5·1‰) point to a 18O-poor meteoric water source and support a continental freshwater setting for the Nova Olinda Member. The δ13C values, which are comparatively rich in 13C (between −0·1 and +1·9‰), are interpreted to reflect reduced throughflow of water in a restricted basin, promoting equilibration with atmospheric CO2, probably in concert with stagnant conditions and low input of soil-derived carbon. Integration of lithological and isotopic evidence indicates a shift from closed to semi-closed conditions towards a more open lake system during the onset of laminite deposition in the Crato Formation.