The potential impact of climate variability on the hydrological regime in the Mahanadi river basin is of great importance for sustainable water resources management. The impact of climate variability on streamflow is analyzed in this study. The impact of climate variability modes on extreme events of Mahanadi basin during June, July, and August (JJA), and September, October, and November (SON) seasons were analyzed, with daily streamflow data of four gauge stations for 34 years from 1980 to 2013 found to be associated with the sea surface temperature variations over Indo-Pacific oceans and Indian monsoon. Extreme events are identified based on their persistent flow for six days or more, where selection of the stations was based on the fact that there was no artificially regulated streamflow in any of the stations. Adequate scientific analysis was done to link the streamflow variability with the climate variability and very significant correlation was found with Indian Ocean Dipole (IOD), El Nino Southern Oscillation (ENSO), El Nino Modoki Index (EMI), and Indian monsoon. Agriculture covers major portion of the basin; hence, the streamflow is very much essential for agriculture as well as population depending on it. Any disturbances in the general flow of the river has subjected an adverse impact on the inhabitants’ livelihood. While analyzing the correlation values, it was found that all stations displayed a significant positive correlation with Indian Monsoon. The respective correlation values were 0.53, 0.38, 0.44, and 0.38 for Andhiyarkore, Baronda, Rajim, and Kesinga during JJA season. Again in the case of stepwise regression analysis, Monsoon Index for the June, July, and August (MI-JJA) season (0.537 for Andhiyarkore) plays significant role in determining streamflow of Mahanadi basin during the JJA season and Monsoon Index for July, August, and September (MI-JAS) season (0.410 for Baronda) has a strong effect in affecting streamflow of Mahanadi during the SON season. Flood frequency analysis with Weibull’s plotting position method indicates future floods in the Mahanadi river basin in JJA season.