The establishment and evolution of the Asian monsoons and arid interior have been linked to uplift of the Tibetan Plateau, retreat of the inland proto-Paratethys Sea and global cooling during the Cenozoic. However, the respective role of these driving mechanisms remains poorly constrained. This is partly due to a lack of continental records covering the key Eocene epoch marked by the onset of Tibetan Plateau uplift, proto-Paratethys Sea incursions and long-term global cooling. In this study, we reconstruct paleoenvironments in the Xining Basin, NE Tibet, to show a long-term drying of the Asian continental interior from the early Eocene to the Oligocene. Superimposed on this trend are three alternations between arid mudflat and wetter saline lake intervals, which are interpreted to reflect atmospheric moisture fluctuations in the basin. We date these fluctuations using magnetostratigraphy and the radiometric age of an intercalated tuff layer. The first saline lake interval is tentatively constrained to the late Paleocene–early Eocene. The other two are firmly dated between ∼46 Ma (top magnetochron C21n) and ∼41 Ma (base C18r) and between ∼40 Ma (base C18n) and ∼37 Ma (top C17n). Remarkably, these phases correlate in time with highstands of the proto-Paratethys Sea. This strongly suggests that these sea incursions enhanced westerly moisture supply as far inland as the Xining Basin. We conclude that the proto-Paratethys Sea constituted a key driver of Asian climate and should be considered in model and proxy interpretations.