The Curiosity rover on the Mars Science Laboratory mission has found extensive evidence that Gale crater once hosted a habitable lacustrine environment; however, there are remaining questions about the chemistry and duration of the lake and the nature of the climate at the time. In this study, we use Mastcam multispectral data to investigate the mineralogy of the Sutton Island member of the Murray formation, a part of the basal layers of Mt. Sharp, which consists of heterolithic mudstone and sandstone that are distinct from the finely laminated mudstones that dominate much of the Murray. Sutton Island includes at least one instance of desiccation cracks, indicative of subaerial exposure, and uniquely irregular diagenetic features that may be related to local bedrock permeability. These features suggest that Sutton Island experienced a complex history of deposition and diagenesis which may be crucial for understanding changing water‐rock interactions within Gale. We find that most Mastcam bedrock spectra in this region lack the absorptions associated with hematite found throughout the Murray, and instead show deeper absorptions shifted toward longer wavelengths that are more consistent with Fe‐smectites such as nontronite. Elemental chemistry from ChemCam supports this interpretation, as SiO, MgO, Li, and the chemical index of alteration are elevated in this region. Combined with observations of bedrock sedimentology, this suggests that Sutton Island was deposited in a nearshore or low stand environment, and we hypothesize that the clay minerals were produced in this region due to sub‐aerial exposure and weathering in a semi‐arid climate.