This study explores the impact of meridional sea surface temperature (SST) gradients across the eastern Indian Ocean on interannual variations in Australian precipitation. Atmospheric general circulation model (AGCM) experiments are conducted in which the sign and magnitude of eastern Indian Ocean SST gradients are perturbed. This results in significant rainfall changes for western and southeastern Australia. A reduction (increase) in the meridional SST gradient drives a corresponding response in the atmospheric thickness gradients and results in anomalous dry (wet) conditions over Australia. During simulated wet years, this seems to be due to westerly anomalies in the thermal wind over Australia and anomalous onshore moisture advection, with a suggestion that the opposite occurs during dry conditions. Thus, an asymmetry is seen in the magnitude of the forced circulation and precipitation response between the dry and wet simulations. To assess the relative contribution of the SST anomalies making up the meridional gradient, the SST pattern is decomposed into its constituent “poles,” that is, the eastern tropical pole off the northwest shelf of Australia versus the southern pole in the central subtropical Indian Ocean. Overall, the simulated Australian rainfall response is linear with regard to the sign and magnitude of the eastern Indian Ocean SST gradient. The tropical eastern pole has a larger impact on the atmospheric circulation and Australian precipitation changes relative to the southern subtropical pole. However, there is clear evidence of the importance of the southern pole in enhancing the Australian rainfall response, when occurring in conjunction with but of opposite sign to the eastern tropical pole. The observed relationship between the meridional SST gradient in the eastern Indian Ocean and rainfall over western and southeastern Australia is also analyzed for the period 1970–2005. The observed relationship is found to be consistent with the AGCM results.