This study describes sedimentation associated with the tsunami generated by the Lisbon earthquake of ad 1755. It is argued here that the tsunami deposited a sand sheet across the Lagoa dos Salgados (central Algarve, Portugal), that is intercalated with late-Holocene estuarine/lagoonal sediments. A wide range of proxies (sedimentological, exoscopic and palaeontological) are used to establish the provenance of the sandy material as well as to constrain the age of the deposit. Stratigraphic criteria are used to distinguish the uniqueness of the event layer. Exoscopic and textural analysis suggest that the source of the event deposit is mainly the dune, beach and underlying layer. Micropalaentological analysis (Foraminifera) indicates a conspicuous increase in diversity and dominance of marine species within the event sediment sheet. The spatial characteristics of the tsunami layer suggests that the barrier prevented widespread overtopping by the incoming tsunami allowing inference of c. 10 m as maximum height at the coast; they also indicate the inlet as the preferential route for both water and sediment transported inland. Dating results (¹⁴C, ²¹⁰Pb and ¹³⁷Cs) allow extrapolation of an age of deposition compatible with the ad 1755 Lisbon earthquake and tsunami, the most devastating event that affected this coastal area in historical times. Correlations with similar deposits detected in nearby lowlands strengthen the argument that the tsunami sediment layer represents a marker horizon in the coastal stratigraphy along the Portuguese Algarve coast. The stratigraphic uniqueness of this event might have implications in the establishment of millennial scale recurrence intervals for this type of high-energy marine inundation.