An anomalous climatic event occurred in the Indian Ocean (IO) region during 1997--1998, which coincided with a severe drought in Indonesia and floods in parts of eastern Africa. Cool sea surface temperature anomalies (SSTAs) were present in the eastern IO along and south of the equator. Beginning in July 1997, warm SSTAs appeared in the western IO, and they peaked in February 1998. An ocean general circulation model is employed to investigate the dynamic and thermodynamic processes that caused the SSTAs associated with this and other similar IO events. The eastern cooling resulted from unusually strong upwelling along the equator and Sumatra. The Sumatran upwelling was forced both locally by the stronger alongshore winds and remotely by equatorial and coastal Kelvin waves. By the end of 1997, weakening of the winds and the associated reduction in latent heat loss led to the elimination of the cold SST anomalies in the east. The western warming was initiated by weaker Southwest Monsoon winds and maintained by enhanced precipitation forcing, which resulted in a barrier layer structure. Analysis of the mixed layer temperature equation indicates that a downwelling Rossby wave contribution was crucial for sustaining the warming into February 1998. It is tempting to suppose that the 1997 event was related to the El Ni¿o-Southern Oscillation (ENSO) event that took place in the Pacific at the same time. Indeed, weaker IO events occur quite regularly in the control run that evolve similarly to the 1997 event, and they are often but not always related to ENSO. We speculate that these events represent a natural mode of oscillation in the IO, which is externally forced by ENSO but also excited by ocean-atmosphere interactions internal to the IO. ¿ 2000 American Geophysical Union