High-frequency fluctuations in paleoenvironmental proxies from the South China Sea, including stable isotopes and abundance of planktonic foraminifers, nannofossils, radiolarians, and palynomorphs, reveal a dynamic local response to the stepwise development of the mid-Pleistocene climate transition (MPT). These proxies indicate a dramatic drop in sea surface temperature (SST) at about 900 ka, the first largest SST decrease in the region during the Quaternary. Estimated winter SST declined from 24–25 °C to 17–18 °C in the northern and from 26–27 °C to 23–24 °C in the southern South China Sea. Subsequent changes in the thermocline depth and faunal–floral turnovers imply a period of about 300 ka in the final stage of the MPT. Winter monsoons increased at ∼900 ka and reached a maximum strength toward the end of the MPT when summer monsoons also strengthened in interglacials. As a result, thermal gradient between the northern and southern South China Sea increased substantially, with stronger winter monsoon influence in the north and warm and saline conditions in the south especially during glacial periods. These N–S paleoceanographic contrasts indicate an initial establishment of the modern-styled semi-enclosed South China Sea about 900 ka ago when passages in the south started to become completely exposed during glacial lowstands. Coupled with deep water cooling and ventilation, uplift of the sill depth in the Bashi Strait to near the present-2400 m during this period caused sudden decline and extinction of Pacific Deep Water benthic foraminifers in the isolated deep sea basin. Together with data from the oceanic western Pacific, these results further imply a considerable weakening of the western Pacific warm pool during MIS 23-22 and in subsequent glacial periods. While the MPT may have invoked high latitude processes especially an increased ice volume, tropical processes more likely have facilitated the restoration of heat and energy to the western Pacific in each interglacial rebound. Planktonic δ13C maxima on eccentricity periocities leading major cooling events during the Quaternary indicate the important role of global carbon reservoir changes due to low as well as high latitude processes in past climate change.