Shale diagenesis differs from that of sandstone and carbonate rocks with regard to the type, evolution stage, and evolution mode. The quality of shale reservoirs is closely linked to the extent of diagenetic evolution. This study identifies the types and characteristics of shale diagenesis using thin sections and scanning electron microscopy (SEM) observations. The stages of shale diagenesis are determined by analyzing organic matter evolution and clay mineral transformation and establishing a diagenetic evolution sequence. This paper describes the comprehensive diagenetic evolution of organic matter, clay minerals, clastic particles, and carbonate minerals to determine the diagenesis types, diagenetic sequences, and pore evolution occurring during diagenetic evolution. The results show that the diagenesis types of shale in the second member of the Funing Formation include compaction, dissolution, cementation, metasomatism, dolomitization, syneresis, and transformation of clay minerals, as well as thermal evolution of organic matter. The middle diagenetic A stage is prevalent, with some areas in the early and middle diagenetic B stages. The shale underwent a diagenetic evolution sequence, including the collapse and shrinkage of montmorillonite interlayers in the early stage; the rapid formation and transformation of illite and smectite mixed layers, massive hydrocarbon generation of organic matters, and dissolution of unstable components in the middle stage; and the occurrence of fractures filled with gypsum, quartz, ferrocalcite, or other authigenic minerals in the later stage. Dissolution pores and fractures are the dominant shale reservoirs of the second member of the Funing Formation in the Subei Basin. The results provide new insights into understanding the formation and evolution of reservoir spaces during shale diagenesis and information for the exploration and development of lacustrine shale oil and gas.