250 million years ago, what is now the Tularosa Basin was covered by a shallow sea that covered most of eastern New Mexico. Marine deposits and sediment filled the bottom of this shallow sea. These sediments would eventually form the gypsum-bearing sedimentary deposit that gave birth to White Sands. 70 million years ago, as the Rocky Mountains were being formed, this area was uplifted out of the ancient sea and formed a dome. Beginning 10 million years ago, the center of the dome began to collapse, forming the Tularosa Basin. The remaining sides of the dome are what we now see as the San Andres and Sacramento mountain ranges forming the perimeter of the Tularosa Basin.
Gypsum enters the picture 
Gypsum, or CaSO.2H2O, normally is not found in the form of sand. Gypsum is soluble in water, thus it is normally dissolved by rain and snow and flushed out to sea.

Gypsum in the sedimentary rock layers in the mountains surrounding the Tularosa Basin was dissolved by rain and snow and carried into the basin. The Tularosa Basin has no natural drainage. Water that enters the basin either sinks into the ground or pools in low points within the basin. Lake Lucero is just such a low spot.

Lake Lucero 
Gypsum-rich waters have collected in Lake Lucero for the past 10 million years. As the waters have collected and evaporated, gypsum got deposited on the surface of Lake Lucero in crystalline form, called selenite. In geologic history, there have been cycles that were very wet, followed by times of evaporation. This allowed the formation of very long crystals of selenite, some up to three feet long. These crystals eventually get broken down by wind, freezing and thawing and eventually form sand-size particles that are carried by the prevailing winds forming the dunes that we know as White Sands.

The Tularosa Basin, Geologic History