In an effort to gain a better understanding of the relationship between climate, sand supply and aeolian sand deposition, an investigation was undertaken in the Algodones dunefield of south-eastern California to determine: (1) the source of the sand and (2) the mode of sand supply to the Algodones dunefield. Textural, geochemical and mineralogical analyses show that the dune sands were mainly derived from Colorado River sands during episodes when the Colorado River drained west to the Salton Basin instead of south to the Gulf of California. A model is presented which relates episodic aeolian deposition in the Algodones dunefield to the growth of the resulting lake under a persistent, intense north-westerly wind regime and to subsequent desiccation of the lake following diversion of the Colorado River to the Gulf of California. Late Holocene radiocarbon ages for relict lake shoreline deposits correlate with documented episodes of extreme flooding and increased winter storminess across the south-western United States. These conditions are likely to have been the cause of intensified north-westerly winds which coincided with high stands of Lake Cahuilla. Although diversion of the Colorado River to the Salton Basin occurred at least three times during the late Holocene, it is evident that the river did not change its course in response to the majority of the floods. It appears that the critical control on diversion of the river was the difference in gradient between courses leading to the Salton Basin and Gulf of California, which in turn was influenced by fluvial deposition and tectonic activity. Flooding was able to cause diversion of the Colorado River to the Salton Basin only when the difference in gradient between the two courses was relatively small.