Abstract The potential impact of Indian Ocean sea surface temperature (SST) anomalies in modulating midlatitude precipitation across southern and western regions of Australia is assessed in a series of atmospheric general circulation model (AGCM) simulations. Two sets of AGCM integrations forced with a seasonally evolving characteristic dipole pattern in Indian Ocean SST consistent with observed “dry year” (PDRY) and “wet year” (PWET) signatures are shown to induce precipitation changes across western regions of Australia. Over Western Australia, a significant shift occurs in the winter and annual rainfall frequency with the distribution becoming skewed toward less (more) rainfall for the PDRY (PWET) SST pattern. For southwest Western Australia (SWWA), this shift primarily is due to the large-scale stable precipitation. Convective precipitation actually increases in the PDRY case over SWWA forced by local positive SST anomalies. A mechanism for the large-scale rainfall shifts is proposed, by which the SST anomalies induce a reorganization of the large-scale atmospheric circulation across the Indian Ocean basin. Thickness (1000–500 hPa) anomalies develop in the atmosphere mirroring the sign and position of the underlying SST anomalies. This leads to a weakening (strengthening) of the meridional thickness gradient and the subtropical jet during the austral winter in PDRY (PWET). The subsequent easterly offshore (westerly onshore) anomaly in the thermal wind over southern regions of Australia, along with a decrease (increase) in baroclinicity, results in the lower (higher) levels of large-scale stable precipitation. Variations in the vertical thermal structure of the atmosphere overlying the SST anomalies favor localized increased convective activity in PDRY because of differential temperature lapse rates. In contrast, enhanced widespread ascent of moist air masses associated with frontal movement in PWET accounts for a significant increase in rainfall in that ensemble set.