Monument Valley was created as material eroded from the ancestral Rocky Mountains, and was deposited and cemented into sandstone. The formations you see in the valley were left over after the forces of erosion worked their magic on the sandstone. A geologic uplift caused the surface to bulge and crack. Wind and water then eroded the land, and the cracks deepened and widened into gullies and canyons, which eventually became the scenery you see today. Natural forces continue to slowly shape the land.
Below is a map of the park. Click the image to zoom in.
