A sedimentary sequence documenting the earliest history of the proto-Indian Ocean (Tethys III) was drilled at Ocean Drilling Program Site 761 on the Wombat Plateau off northwest Australia. Directly above a postrift unconformity, three unique, fining-upward Berriasian-Valanginian (Lower Cretaceous) units were recovered which clearly reflect deposition in the earliest oceanic environments. The lower two units are transgressive lag deposits. The uppermost unit is composed of calcisphere-nannofossil chalk and six interbedded bentonite horizons, suggesting a volcaniclastic origin and dacitic to rhyolitic ash as parent material. Volcanic activity was associated with continental breakup and rapid tectonic subsidence during the "juvenile ocean" phase of the Early Cretaceous Tethys. These sedimentary deposits are characterized by an unusual array of fossil components, including belemnites, and a low-diversity flora of calcispheres and thoracospheres, thought to be opportunistic. Assemblage and isotopic data suggest that this narrow, east-west-trending, incipient ocean basin was highly productive as a result of upwelling of deep waters.