Changes in the environmental condition associated with climatic events could potentially influence the PSC dynamics of the regional marine ecosystem. The Indian Ocean dipole (IOD) is one of the critical ocean–atmosphere interactions that affects the climate of the Arabian Sea, and it could be a potential factor influencing the regional PSC distribution. However, the relationship between PSC and IOD remains unclear and less explored. In this study, using the in-situ database acquired from the Arabian Sea, we reparametrized the three−component abundance−based phytoplankton size class model and applied it to reconstructed satellite−derived chlorophyll−a concentration to extract the fractional contribution of phytoplankton size classes to chlorophyll−a concentration. Further, we investigated the influence of IOD on the changes in the biological–physical properties in the Arabian Sea. The results showed that the biological–physical processes in the Arabian Sea are interlinked and the changes in the IOD mode control the physical variables like sea surface temperature (SST), sea surface height (SSH), and mixed layer depth (MLD), which influence the specific PSC abundance. Unprecedented changes in the PSC distribution and physical properties were observed during the extreme positive and negative IOD events, which clearly indicated the potential role of IOD in altering the PSC distribution in the Arabian Sea. This study highlights the impact of extreme climate events on PSC distribution and the need for a better understanding of the associated physical–biological–climate interactions.