The Pleistocene sediment infill of elongated glacial incisions of the Southern North Sea (SNS) often is referred to as tunnel valleys (TV). Its depositional environment is not yet fully understood and present study addresses this challenge from a perspective of clay mineral transformation (illite to I-S) reported from the largest Elsterian TV of SNS. Material acquired from the K14-12 borehole in the Dutch offshore was analyzed by X-ray diffraction, electron microscopy, electron microprobe analyses, and laser particle-size analysis. Illite and illite-smectite appeared as dominant clays along with minor amounts of kaolinite, kaolinite-smectite, and chlorite. Highest amount of I-S is recognized in TV main portion, while in pre-glacial and uppermost deposits I-S is less abundant. The XRD peak fitting and deconvolution suggest I-S consists of several intermediates – ordered (well-crystallized illite + R3 I-S) and disordered (R0 I-S + R0 I-SS). Given the average particle sizes (> 2 μm) and Kübler index values (0.415-0.341°Δ2θ), illite as well as chlorite and kaolinite were interpreted as detrital. On the basis of I-S distinctive distribution, grain sizes, and compositional variations its formation by way of early diagenetic in-situ smectitization of illite under a cold climate is proposed. The process operated via a series of mixed-layer intermediates derived from an illite component being progressively converted to low-charged smectite. The reaction is marked by a significant net loss of K and Al with replacement by Si in a tetrahedral coordination. Layer charge imbalance is accommodated by Fe3+ and Mg entering an octahedral layer, whereas Ca partly fills the interlayer sites. Smectitization rates were controlled by illite grain sizes. The results of this study strongly support the existence of an ice-marginal fresh water depositional environment at the glacial maximum in SNS in which early diagenesis at low temperatures resulted in incomplete illite conversion into smectite.