Marine animals forage in areas that aggregate prey to maximize their energy intake. However, these foraging 'hot spots' experience environmental variability, which can substantially alter prey availability. To survive and reproduce animals need to modify their foraging in response to these prey shifts. By monitoring their inter-annual foraging behaviours, we can understand which environmental variables affect their foraging efficiency, and can assess how they respond to environmental variability. Here, we monitored the foraging behaviour and isotopic niche of little penguins (Eudyptula minor), over 3 years (2008, 2011, and 2012) of climatic and prey variability within Port Phillip Bay, Australia. During drought (2008), penguins foraged in close proximity to the Yarra River outlet on a predominantly anchovy-based diet. In periods of heavy rainfall, when water depth in the largest tributary into the bay (Yarra River) was high, the total distance travelled, maximum distance travelled, distance to core-range, and size of core- and home-ranges of penguins increased significantly. This larger foraging range was associated with broad dietary diversity and high reproductive success. These results suggest the increased foraging range and dietary diversity of penguins were a means to maximize resource acquisition rather than a strategy to overcome local depletions in prey. Our results demonstrate the significance of the Yarra River in structuring predator-prey interactions in this enclosed bay, as well as the flexible foraging strategies of penguins in response to environmental variability. This plasticity is central to the survival of this small-ranging, resident seabird species.