Worldwide, Quaternary loess-paleosol sequences archive terrestrial paleoenvironmental information. The Palouse loess in the northwestern USA is one such deposit representing at least a million years of sediment accumulation. Loess paleosol sequences are often studied via the magnetic susceptibility of sediments and the changes in susceptibility with depth. However, since variations in magnetic susceptibility can have different underlying causes, the interpretation of the magnetic susceptibility of loess depends on factors specific to each major loess region. We measured the magnetic susceptibility of sediments along depth profiles in a well-studied exposure of the Palouse loess in eastern Washington, USA (the “CLY-2 site,” 46.3131° N, 118.4874° W, WGS84). Our measurements show that the magnetic susceptibility of sediments in the Palouse loess varies systematically and predictably with depth and can be correlated with other magnetic susceptibility profiles at the outcrop scale and at the regional scale. We also measured changes in grain size, elemental abundance, mineralogy, and other magnetic properties to determine the most likely cause of the magnetic susceptibility signal. Based on these results, variations in magnetic susceptibility in the Palouse are likely driven mostly by changes in coarse sediment supply and accumulation of tephra rather than changes in weathering. Magnetic susceptibility is useful as an inexpensive, non-destructive tool for stratigraphic correlation of Quaternary loess deposits in the Palouse, especially in combination with paleosol stratigraphic markers and known tephra deposits.