Abstract The global warming associated with the Paleocene–Eocene Thermal Maximum (PETM) ca. 55.5 Myr ago is the most dramatic identified short-term temperature increase of the Cenozoic. One direct consequence of a warming world is a rise in sea level, due primarily to the thermal expansion of water as oceans warmed. The Kumara-2 core, South Island, New Zealand, spans the Paleocene/Eocene transition and provides a rare southern hemisphere continental margin record of the PETM. Lithology, palynology and compound-specific stable isotope compositions of higher plant leaf wax n-alkanes reveal a 4.85 m PETM and a carbon isotope excursion (CIE) of ca. − 4.5‰, larger than the − 2.5 to − 3.5‰ CIEs generally recorded by deep sea foraminifera. There is a shift from a terrestrial to a marine, potentially anoxic, sedimentary depositional environment at the base of the PETM, interpreted as being the result of a local sea level rise. Coincident with the onset of the CIE is the appearance of pollen associated with thermophilic conditions and the development of Nypa mangrove swamps. Moreover, there is a reorganisation of the angiosperm pollen assemblage during the PETM, and an initial increase in fern spores and decrease in gymnosperms. Crucially, all of these changes occur below the horizon characterised by the most negative δ 13C values, suggesting that: 1) the recorded negative excursion of 4.5‰ may indeed reflect the shift in atmospheric CO 2 isotopic composition; and 2) that the large input of 13C-depleted carbon into the ocean–atmosphere system was not geologically instantaneous, with at least some of the added carbon lagging warming, sea level rise and vegetation change. Furthermore, compound-specific hydrogen isotope analyses show a large degree of variability both directly before and during the CIE, suggesting that the PETM in New Zealand was characterised by complex and transient changes in the hydrological regime, similar to those reported in North America, the Arctic and Eastern Africa. Thus, the new PETM record from Kumara-2 reveals local climatic and biotic responses, driven by a combination of global warming and the consequential change in local depositional environment induced by sea level rise.