The replacement of the basal synapsid pelycosaurs by the more ‘mammal-like’ therapsids in the Permian was an important event in the history of tetrapods because it initiated the eventual transition to the mammals. It is also an example of taxon replacement in the fossil record that is unusually amenable to explanation, based on a combination of analysis of the biological significance of the inferred character changes, with the stratigraphic, palaeogeographic and palaeoecological circumstances of the time. An hypothesis is presented in which the origin of the therapsids resulted from a correlated progression of character evolution leading to higher levels of metabolic activity and homeostatic regulation of the body. It was a response to the availability of a seasonally arid, savanna-like biome. The subsequent explosive radiation of therapsids was associated with habitat expansion made possible by the Mid-Permian development of geographical continuity between that biome and the temperate biomes. The final extinction of the pelycosaurs was a case of incumbent replacement by the new therapsid lineages.