Sea-surface temperature interannual anomalies (SSTAs) in the thermocline ridge of the southwestern tropical Indian Ocean (TRIO) have several well-documented climate impacts. In this paper, we explore the physical processes responsible for SSTA evolution in the TRIO region using a combination of observational estimates and model-derived surface layer heat budget analyses. Vertical oceanic processes contribute most to SSTA variance from December to June, while lateral advection dominates from July to November. Atmospheric fluxes generally damp SSTA generation in the TRIO region. As a result of the phase opposition between the seasonal cycle of vertical processes and lateral advection, there is no obvious peak in SSTA amplitude in boreal winter, as previously noted for heat content anomalies. Positive Indian Ocean Dipole (IOD) events and the remote influence of El Niño induce comparable warming over the TRIO region, though IOD signals peak earlier (November–December) than those associated with El Niño (around March–May). Mechanisms controlling the SSTA growth in the TRIO region induced by these two climate modes differ strongly. While SSTA growth for the IOD mostly results from southward advection of warmer water, increased surface shortwave flux dominates the El Niño SSTA growth. In both cases, vertical oceanic processes do not contribute strongly to the initial SSTA growth, but rather maintain the SSTA by opposing the effect of atmospheric negative feedbacks during the decaying phase.