Rivers provide an excellent system to study interactions between patterns of biodiversity structure and ecological processes. In these environments, gene flow is restricted by the spatial hierarchy and temporal variation of connectivity within the drainage network. In the Australian arid zone, this variability is high and rivers often exist as isolated waterholes connected during unpredictable floods. These conditions cause boom/bust cycles in the population dynamics of taxa, but their influence on spatial genetic diversity is largely unknown. We used a landscape genetics approach to assess the effect of hydrological variability on gene flow, spatial population structure and genetic diversity in an Australian freshwater fish, Macquaria ambigua. Our analysis is based on microsatellite data of 590 samples from 26 locations across the species range. Despite temporal isolation of populations, the species showed surprisingly high rates of dispersal, with population genetic structure only evident among major drainage basins. Within drainages, hydrological variability was a strong predictor of genetic diversity, being positively correlated with spring-time flow volume. We propose that increases in flow volume during spring stimulate recruitment booms and dispersal, boosting population size and genetic diversity. Although it is uncertain how the hydrological regime in arid Australia may change under future climate scenarios, management strategies for arid-zone fishes should mitigate barriers to dispersal and alterations to the natural flow regime to maintain connectivity and the species’ evolutionary potential. This study contributes to our understanding of the influence of spatial and temporal heterogeneity on population and landscape processes.