The changes of magnetic susceptibility (κ) are correlated with those of corresponding sedimentological, geochemical, mineralogical and biological results, which verifies that κ can be taken as one of the environmental proxies. However, usually the exact origin of magnetic signal is poorly understood, and is difficult to relate with the environmental evolution. Magnetic properties of material derived from the catchment and sedimentary environment may affect the accumulation, preservation, or authigenesis and diagenesis of magnetic minerals. In the Lake Hulun region in Inner Mongolia, it is found that muddy sediments, deposited during high water level period (corresponding to humid climate), have comparatively high κ values. In contrast, the sandy sediments, deposited during low water level period (corresponding to arid climate), have low κ values. Detailed rock magnetic investigation confirms that detrital magnetite derived from volcanic rocks in the catchment exists in both muddy and sandy sediments. During high water level period, secondary ferrimagnetic iron sulphide was produced in muddy sediments under relatively reductive conditions. Ferrimagnetic iron sulphide, coexisting with detrital magnetite, predominates the magnetic properties of muddy sediments, resulting in increasing κ. This paper reveals the significance of authigenic ferrimagnetic iron sulphide produced after sediment deposition.