Mud volcanoes of Azerbaijan and the South‐Caspian Basin (SCB) are closely related to the tectonic processes in the basin and the orogenic system of the Greater and Lesser Caucasus. The maximum density of the mud volcanoes in Azerbaijan and the SCB is observed in the Shamakha‐Gobustan zone. The joint manifestation of mud volcanism and shallow earthquakes shows the intensive processes in sedimentary strata causing mechanical instability as well as the formation of seal failure of the sedimentary rocks. A large amount of active mud volcanoes and the volume of their gas emissions prove the vast scale of fluid generation. From onshore and offshore mud volcano estimations more than 109 m3 of gases erupt annually. Isotope‐geochemical studies show that fluids have been generated by Mesozoic, Paleogene and Miocene complexes and, the fluid generation zone is reaching 8–10 km and extending to the basement. Fluid dynamics of mud volcanoes in the South Caspian Basin is closely related to seismic and solar activity and has an enormous influence on land and Caspian Sea ecology.