In this paper we examine the relationship between the seasonal and interannual variability observed in the water flow through the Corsica Channel and the sea level difference between the Tyrrhenian and Ligurian Seas. The steric contribution to the sea level difference, computed from historical hydrological data, is in good agreement with the stable presence of the seasonal signal in the water exchanges. We obtain the maximum steric difference in winter (~16 cm) and the minimum in summer (~2 cm). These values are consistent with the corresponding estimates of water volume transport (0.8 and <0.1 Sv in winter and summer, respectively). Also, TOPEX/Poseidon (T/P) satellite altimetry is shown to be capable of capturing the sea level difference anomaly between the two basins at seasonal and interannual scales. Accuracy of altimeter data in the study region has been checked using measurements from a bottom pressure recorder deployed in Capraia Island (rms difference is found to be ~2 cm after application of a 30-day half-amplitude Gaussian filter). Because of the lack of an accurate geoid, the total water transport cannot be adequately monitored by satellite altimetry alone. However, the recovered signal can be directly related to the water transport anomaly through the channel. The resulting T/P signal can be considered as representing, to a great extent, the real steric variation induced by the net sea surface heat fluxes. The high correlation found between the water transport and sea level difference anomalies confirms the results obtained by the climatological hydrography and provides new evidence that interannual differences in the sea level and water transport can be related to the different heat flux balance in the Tyrrhenian and Ligurian Seas. Moreover, it demonstrates, for the first time in the Mediterranean, the potential of satellite altimetry for long-term monitoring of the water exchanges between adjacent basins. ¿ 2000 American Geophysical Union