The Indian Coastal Current is the only channel for material exchange between the two largest marginal seas in the northern Indian Ocean: the Bay of Bengal and the Arabian Sea. However, its past history is poorly known, limiting accurate predictions of its future changes. Here, we present a new clay mineral record from south of India supported by interpretations of model simulations to trace its variability over the last 18,000 years. Decreased smectite/(illite+chlorite) ratios during the cold intervals suggest that a stronger northeasterly wind led to a mean southward flow of the Indian Coastal Current in the Bay of Bengal. In contrast, increased smectite/(illite+chlorite) ratios during the warm intervals suggest the opposite scenario. Combining the proxy record with model simulations, we infer that atmospheric circulation changes were the main driver of the changes. Moreover, a possible link is observed between a positive Indian Ocean Dipole (IOD) and weakened southward flow of the Indian Coastal Current in the Bay of Bengal during the Holocene. These findings imply that future warming scenarios, if associated with more intense positive IOD events as proposed, may lead to a reduction in fresh water transport from the Bay of Bengal to the Arabian Sea.