Using an atmospheric general circulation model and observed datasets of sea surface temperature and rainfall, we studied the influence of the Indian Ocean Dipole (IOD) on the Australian winter rainfall. The IOD has significant negative partial correlations with rainfall over the western and southern regions of Australia. These negative partial correlations extend south-eastward from Indonesia all the way to south east Australia. Our atmospheric general circulation model sensitivity experiments indicate that cold sea surface temperature anomalies prevailing west of the Indonesian archipelago during the positive IOD events introduce an anomalous anticyclonic circulation at lower levels over the eastern tropical and subtropical Indian Ocean, and over much of the Australian continent. It is also apparent that the response of the atmosphere to the IOD in this region is baroclinic, causing anomalous subsidence and anomalous reduction in the rainfall over the affected regions of Australia.