The Junggar Basin is rich in low-rank coalbed gas resources. This paper uses the stable isotopes of gas and coproduced water to analyze the origin and distribution of coalbed gas in the Lower Jurassic Badaowan Formation in the Fukang area of southern Junggar Basin, China. In this work, it was found that microbial gas is mainly present at depths ≤800 m where the temperature and total dissolved solids were suitable for methanogen gas production. Thermogenic gas is primarily present at buried depths greater than 1000 m where the coal seam has a higher degree of thermal evolution, and a mixture of the two was present at buried depths of 800–1000 m. Thermogenic gas accounts for 40.1% to 41.7%. Microbial gas accounts for the remaining 58.3% to 59.9% and is generated mainly by CO2 reduction. A fraction of microbial gas is likely produced via acetate fermentation on the eastern and western sides. High gas contents are confined to permeable coal seams where microbial activity continues, that is, at depth of 600–1000 m. The extensive biological effects from Mesozoic to present day have resulted in the extremely heavy δ13C-CO2 values. Na-HCO3-Cl–type water and high total dissolved solids indicate that the study area is distal to the recharge zone. Strong water evaporation in the study area leads the hydrogen and oxygen isotopes of formation water to deviate to the right of the global meteoric water line.