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Long paleoecological records are critical for understanding evolutionary responses to environmental forcing and unparalleled tools for elucidating the mechanisms that lead to the development of regions of high biodiversity. We use a 1.2-My record from Lake Malawi, a textbook example of biological diversification, to document how climate and tectonics have driven ecosystem and evolutionary dynamics. Before ∼800 ka, Lake Malawi was much shallower than today, with higher frequency but much lower amplitude water-level and oxygenation changes. Since ∼800 ka, the lake has experienced much larger environmental fluctuations, best explained by a punctuated, tectonically driven rise in its outlet location and level. Following the reorganization of the basin, a change in the pacing of hydroclimate variability associated with the Mid-Pleistocene Transition resulted in hydrologic change dominated by precession rather than the high-latitude teleconnections recorded elsewhere. During this time, extended, deep lake phases have abruptly alternated with times of extreme aridity and ecosystem variability. Repeated crossings of hydroclimatic thresholds within the lake system were critical for establishing the rhythm of diversification, hybridization, and extinction that dominate the modern system. The chronology of these changes closely matches both the timing and pattern of phylogenetic history inferred independently for the lake’s extraordinary array of cichlid fish species, suggesting a direct link between environmental and evolutionary dynamics.