Fault reactivation study is significant for reconstructing basin evolution and paleoenvironment. Balanced geological profile method was proposed to restore past fault reactivation in this paper. This method can take into account important information such as differential compaction and strata erosion thickness. It can directly measure the slippage of faults by curve, and has important application value in identifying the direction of fault reactivation in a specific geological period, which is an improvement on the traditional fault reactivation analysis method. Two episodes of structure inversion were identified by analyzing the fault reactivation characteristic in the western Qaidam basin using this method. The first episode was converted from the compression environment in the late Mesozoic to the extensional tectonic environment in the Paleogene of the Cenozoic. The second phase is the change in the deposition period of the Shangganchaigou Formation (N 1) from the extensional tectonic background to compressional tectonic background. The extensional tectonic background of the sedimentary period of the upper Xiaganchaigou Formation (E 32) controlled the development of high- quality source rocks. After the depositional period of the Shangganchaigou Formation, the Qaidam basin was converted into a compressional tectonic background, which controlled the traps formation that captured hydrocarbons that were formed at a later stage. Inversion structures near faults can form early traps and have the potential to capture early generated low- mature hydrocarbons, and are promising for deep petroleum exploration.