Cinnabar is a hydrothermal mineral that precipitates from ascending hot waters and vapors as they move through fractured rocks. It forms at shallow depths where temperatures are less than about 200 degrees Celsius. It usually forms in rocks surrounding geologically recent volcanic activity but can also form near hot springs and fumaroles.

Cinnabar precipitates as coatings on rock surfaces and as fracture fillings. Less often, cinnabar can be deposited in the pore spaces of sediments. It is usually massive in habit and is rarely found as well-formed crystals. Other sulfide minerals are generally found associated with cinnabar. These can include pyrite, marcasite, realgar, and stibnite. Gangue minerals associated with cinnabar include quartz, dolomite, calcite, and barite. Small droplets of liquid mercury are sometimes present on or near cinnabar.