The hematite deposit in Meridiani Planum was selected for a Mars Exploration Rover (MER) landing site because water could be involved in the formation of hematite, and water is a key ingredient in the search for life. Our discovery of a chain of paleolake basins and channels along the southern margin of the hematite deposits in Meridiani Planum with the presence of the strongest hematite signature adjacent to a paleolake basin, supports the possible role of water in the formation of the hematite and the deposition of other layered materials in the region. The hematite may have formed by direct precipitation from lake water, as coatings precipitated from groundwater, or by oxidation of preexisting iron oxide minerals. The paleolake basins were fed by an extensive channel system, originating from an area larger than Texas and located south of the Schiaparelli impact basin. On the basis of stratigraphic relationships, the formation of channels in the region occurred over much of Mars' history, from before the layered materials in Meridiani Planum were deposited until recently. The location of the paleolake basins and channels is connected with the impact cratering history of the region. The earliest structure identified in this study is an ancient circular multiringed basin (800-1600 km diameter) that underlies the entire Meridiani Planum region. The MER landing site is located on the buried northern rim of a later 150 km diameter crater. This crater is partially filled with layered deposits that contained a paleolake in its southern portion. Copyright 2003 by the American Geophysical Union.