The mean seasonal cycle of surface heat budget is examined using historical temperature data combined with climatological wind stress and surface heat flux in the South China Sea. In most parts of the basin, we see a negative correlation between sea surface temperature (SST) and mixed layer depth (MLD); that is, SST tends to be higher (lower) when MLD is shallower (deeper). Given the characteristics of the MLD distribution, we further partition the South China Sea into four smaller areas: one along the continental slope south of China, one off west Luzon, one in the central part of the basin, and one near the coast of Vietnam. Heat budget assessment in these smaller areas indicates that although surface heat flux is fundamental to the mean seasonal cycle of SST, the effect of ocean dynamics is not negligible. Adding the contribution of ocean dynamics better explains the SST tendency. Ekman advection forced by the northeast monsoon is the primary heating process in winter but becomes less important as the horizontal temperature gradient decreases in the following seasons. Vertical entrainment is effective at cooling when the southwest monsoon prevails, which works against the surface heating and leads to a decrease of SST by up to 5 months earlier than surface heat flux starts to cool the ocean. ¿ 2001 American Geophysical Union