Seasonal and interannual variabilities of surface and subsurface chlorophyll (Chl) in the eastern equatorial Indian Ocean (IO) and Bay of Bengal were examined based on vertical Chl inferred from satellite data. Four biotic zones were identified by Empirical orthogonal function analysis, which represented different types of mixed layer processes. The areas south of Sri Lanka indicated the most significant Chl increase in the surface and subsurface during summer due to coastal upwelling. Surface Chl highs in the Sri Lanka Dome occurred every summer during the time series. Chl increases were also recorded in the southwestern Bay of Bengal during fall–winter in response to wind-induced divergence and convective mixing. The other two zones in south IO basin between 5 and 15°S exhibited seasonal surface Chl highs in summer and subsurface Chl maximum during fall–winter. Wind-induced divergence plays a major role in the maintenance of this upwelling zone year-round; however, stratification inhibited the surface Chl increase in winter and results in enhanced Chl in the subsurface. The Chl interannual variability was related with Indian Ocean dipole (IOD) associated physical field oscillations. In positive IOD, wind divergence increased significantly along the eastern equatorial IO coast that contributed to Chl enhancement there, it decreased in Bay of Bengal and South IO and acted to reduce the Chl in these regions. In negative IOD, reversals in the forcing anomalies drove increasing Chl in Bay of Bengal and South IO and decreasing of that in the eastern equator. This resulted in significant correlations between IOD index and Chl confined in these regions. There are pronounced variance of phytoplankton carbon biomass in the Bay of Bengal in IOD events, however, less changes of that were seen over the South IO during IOD. Our findings imply that physiological changes in cellular pigmentation are the dominant cause of satellite-observed interannual variations in Chl in the South IO. Our results highlight the role of physiological processes in regulating Chl distributions, and support the use of Chl-based indices as indicators of climatic feedbacks.