The organic- rich shale in the Shandong province has many development layers, types and a wide distribution range. In order to explore the favorable reservoir and distribution range of shale gas, the organic- rich shale is taken as the research object. The study analyzes the lithological characteristics of the organic- rich mud shale, organic carbon content, hydrocarbon generation potential, chloroform asphalt “A”, kerogen type, vitrinite reflectance and other organic geochemical characteristics, petrophysical characteristics such as porosity, permeability, mineral composition, rock density and gas bearing characteristics etc. Based on a systematic and comprehensive understanding of the occurrence of shale gas in Shandong Province, the physical basis of its formation, the degree of thermal evolution, and the reservoir characteristics have been determined. The biocarboniferous- Permian Shanxi- Taiyuan Formation, the Cenozoic Paleogene Kongdian Formation and the Shahejie Formation are favorable reservoirs for shale gas due to their large development thickness, wide distribution area, high organic matter abundance, moderate thermal evolution degree and high brittle mineral content. The potential of shale gas resources in Shandong Province was calculated to be 1417797×108 m3. Amongst the optimal nine areas favorable for shale gas, the Southwest Shandong favorable area, Yanggu- Chiping favorable area, North Yellow River favorable area and Jiazhenlatent Sag favorable area belong to marine land interactive facies shale reservoir. The argillaceous strata are distributed in the Carboniferous Permian Shanxi- Taiyuan Formation, Weibei Sag, Dongying Sag, Zhanhua Sag, Chezhen- Zhanhua Sag. The favorable area of Linyi belongs to lacustrine shale reservoir, and the shale system is distributed in the Kongdian Formation and the Shahejie Formation of the Paleogene respectively. These results provide a basis for the future exploration of shale gas.