Subantarctic Mode Water (SAMW) is formed by deep convection in winter on the equatorward side of the Antarctic Circumpolar Current. Observations south of Australia show that the SAMW temperature (T) and salinity (S) vary significantly from year to year. The magnitude and density-compensating nature of the temperature and salinity changes cannot be explained by variations in air–sea exchange of heat and freshwater in the subantarctic zone where SAMW is formed. Rather, the T and S variability reflects variations in the equatorward Ekman transport of cool, low salinity water across the subantarctic front. Experiments with a coupled climate model suggest that the observations south of Australia are typical of the subantarctic zone. The model changes in SAMW properties are correlated significantly (at 99% level) with changes in wind stress and northward Ekman transport of cool low-salinity water. In contrast, air–sea heat flux anomalies are mostly a response to changes in SST, and anomalies in precipitation minus evaporation in the subantarctic zone are too small to account for the model SAMW salinity variations. Mode waters provide significant reservoirs of heat and freshwater that extend below the depth of the seasonal thermocline and, hence, can persist from year to year. The fact that wind stress variations can drive changes in mode water properties therefore has implications for climate variability.