The paper reports palynology and palynofacies studies of lignite-bearing sediments exposed in an opencast mine succession at Surkha, Bhavnagar District, in the coastal region of Gujarat, India. The study examined the relationships between the palynoflora, sedimentary organic matter and environment at the time of deposition of lignite and associated sediments. Based on dinoflagellate cyst biostratigraphy, the sedimentary succession is dated as early Eocene (Ypresian). Palynofacies studies helped reveal the palaeoenvironmental fluctuations. The dominance of angiosperm pollen grains, freshwater algae, microthyraceous fungi and a large share of land debris in the lower part of the succession suggests a freshwater swamp environment of deposition for the basal lignite facies. Two cenozones – Matanomadiasulcites maximus and Lakiapollis ovatus – were identified in the lower lignite facies, determined from the dominance of these pollen grains in the palynological assemblages. The presence of angiosperm pollen grains and pteridophyte spores in the carbonaceous shale horizon above the lignite facies indicates a change in the depositional regime from freshwater swamp to lagoonal. This was identified as the Arecipites wodehousei cenozone due to its numerical abundance in the assemblage. Dinoflagellate cyst abundance and diversity, and microforaminiferal test linings along with well-sorted terrestrial debris in the mudstone in the upper part of the succession suggest a more open marine estuarine type of depositional environment. The Homotryblium complex along with Cordospheridium fibrospinosum, Kenleyia sp., and Thalassiphora pelagica dinoflagellate cysts are the main representatives of this zone, determined as the Homotryblium tenuispinosum cenozone. The changing depositional settings (freshwater swamp–lagoonal–estuarine) along the vertical succession indicate a marine transgression in this region. Results from palynological studies of early Palaeogene successions of the Cambay and Kutch basins correlate well with the present findings.