Abstract Analysis of a time series of southern Australian sea surface temperature satellite images for the period March 1990 to September 1991 revealed the existence of a warm water mass in the north western Great Australian Bight (GAB). This water mass developed in the summer months, had a temperature 2–3°C above that of surrounding waters and spread in a southeastward direction to about 137° to 138°E during late summer and early autumn. Significantly colder water was consistently observed in the eastern GAB during autumn. During late autumn and winter, the Leeuwin Current was seen to intrude into the GAB region and interact with the GAB water, producing a continuous band of warm water stretching across the southern Australian coast. The development of the warm GAB water was observed to be independent of any influence of the Leeuwin Current, and it is proposed that the source of the warm GAB water is from processes local to the region. A calculated heat budget applicable to the northwestern GAB coastal region indicated that a positive net heat flux exists during spring, summer and early autumn. Large air-sea temperature differences (up to 20°C) during periods of offshore wind create a stable atmospheric boundary layer which inhibits sensible and latent heat losses. The net heat flux is almost solely attributable to the large incoming short wave radiation component under these conditions, which may be significant in maintaining the observed positive net heat flux. The region of greatest warming in the northwestern GAB is associated with a large expanse of shallow water (< 30 m), and a larger temperature change in the water column over this region than over surrounding deeper regions results when a uniform positive heat flux is applied over the GAB. This is the proposed mechanism responsible for the production of the observed warm GAB water.