Hypolithic microbes, primarily cyanobacteria, inhabit the highly specialized microhabitats under translucent rocks in extreme environments. Here we report findings from hypolithic cyanobacteria found under three types of translucent rocks (quartz, prehnite, agate) in a semiarid region of tropical Australia. We investigated the photosynthetic responses of the cyanobacterial communities to light, temperature and moisture in the laboratory, and we measured the microclimatic variables of temperature and soil moisture under rocks in the field over an annual cycle. We also used molecular techniques to explore the diversity of hypolithic cyanobacteria in this community and their phylogenetic relationships within the context of hypolithic cyanobacteria from other continents. Based on the laboratory experiments, photosynthetic activity required a minimum soil moisture of 15% (by mass). Peak photosynthetic activity occurred between approximately 8°C and 42°C, though some photosynthesis occurred between −1°C and 51°C. Maximum photosynthesis rates also occurred at light levels of approximately 150–550 μmol m−2 s−1. We used the field microclimatic data in conjunction with these measurements of photosynthetic efficiency to estimate the amount of time the hypolithic cyanobacteria could be photosynthetically active in the field. Based on these data, we estimated that conditions were appropriate for photosynthetic activity for approximately 942 h (∼75 days) during the year. The hypolithic cyanobacteria community under quartz, prehnite and agate rocks was quite diverse both within and between rock types. We identified 115 operational taxonomic units (OTUs), with each rock hosting 8–24 OTUs. A third of the cyanobacteria OTUs from northern Australia grouped with Chroococcidiopsis, a genus that has been identified from hypolithic and endolithic communities from the Gobi, Mojave, Atacama and Antarctic deserts. Several OTUs identified from northern Australia have not been reported to be associated with hypolithic communities previously.