The 2001–2007 Australian drought was the hottest on record with inflows to Australia's longest river system, the Murray-Darling, reaching an historical low. Here we examine the relative importance of rising temperature and decreasing rainfall over its catchment, the Murray Darling Basin (MDB). Although annual-total inflow is more sensitive to rainfall over the southern MDB, where rainfall since 2001, has been the lowest on record, this alone can not explain the observed inflow decline. A relationship exists between inflow variations and fluctuations of temperature not associated with rainfall in the austral winter and spring: a rise of 1°C leads to an approximate 15% reduction in the climatological annual inflow. Our results provide strong evidence that rising temperatures due to the enhanced greenhouse effect have a strong impact on southern Australia's water resources, in addition to any reduction in rainfall, and project a long-term decline in inflows to this river system as the greenhouse effect continues.