The Pleistocene represents the youngest period of repeated widespread glaciation and interglacial intervals of both hemispheres. The Pleistocene–Holocene siliciclastics of the Peshawar Basin preserve a significant terrestrial record of palaeoclimatic fluctuations during this glacial time interval in northwest Pakistan at latitudes of 33–35°N. The sedimentological evidences indicate that the lower part of the stratal package consists of floodplain clay cycles overlain by lacustrine‐glaciofluvial rhythmites, that are followed by loess deposits and finally recent floodplain clays. The geochemical proxies demonstrate an overall cold‐arid climate with very low intensity of chemical weathering, whereas the clay mineralogy and related indices suggest intensifying physical erosion. The chemical index of alteration (CIA) reflects comparatively slightly higher (but still very low) intensity of chemical weathering for the lowermost part of the succession and uppermost loess deposits. The illite‐rich clay mineralogy of these two lithofacies associations also indicates the prevailing cold‐arid palaeoclimate. The low CIA and smectite‐rich clay mineralogy of the rhythmites, on the other hand, reflect deposition in poorly drained lakes. Multiple evidences for break‐out floods and the presence of ice‐rafted debris (IRD) within the rhythmites provide conclusive evidences for ice damming in the Peshawar Basin and drainage blockage due to the uplift of the Attock–Cherat Range. The floodplain clays indicate deposition in an interglacial semiarid–semihumid palaeoclimate preceding the Shanoz stage glaciation. The rhythmites correlate with the Shanoz, Yunz, and Borit Jheel glacial stages. The loess deposits indicate aeolian deposition in a cold, periglacial environment spanning over the late glacial maximum (LGM) interval.