Lithotype banding, identified on colour and texture of the coal, occurs in all seams covering the period Mid Eocene to Late Miocene in the Latrobe Valley. Preliminary palaeobotanical studies on both pollen and plant macrofossil components of the youngest seams indicated strong relationships between lithotype, vegetation and inferred depositional environment with the lithotype gradient from lightest to darkest coals corresponding with hydroseral stages from unvegetated open water-through swamp forest-to raised bog communities. Subsequent studies on the older seams failed to show such close correspondence between lithotype and vegetation. The analysis of palynological and petrological data from all seams in this paper adds support to the original hypothesis of lithotype formation. However, it also demonstrates a gradual differentiation of lithotypes through the coal-forming period. This most likely involved the progressive development of vegetation communities adapted to the range of swamp environments with the peatforming environment. Of particular significance is the development of a community with a significant sclerophyll component within the predominant rainforest vegetation, which colonised the raised bogs of the youngest seams. The process may have been facilitated or accelerated by an increasingly variable climate and the increased importance of fire within the region.