Climate variability in the Indian Ocean region seems to be, in some aspects, independent of forcing by external phenomena such as the El Niño/Southern Oscillation. But the extent to which, and how, internal coupled ocean-atmosphere dynamics determine the state of the Indian Ocean system have not been resolved. Here we present a detailed analysis of the strong seasonal anomalies in sea surface temperatures, sea surface heights, precipitation and winds that occurred in the Indian Ocean region in 1997-98, and compare the results with the record of Indian Ocean climate variability over the past 40 years. We conclude that the 1997-98 anomalies--in spite of the coincidence with the strong El Niño/Southern Oscillation event--may primarily be an expression of internal dynamics, rather than a direct response to external influences. We propose a mechanism of ocean-atmosphere interaction governing the 1997-98 event that may represent a characteristic internal mode of the Indian Ocean climate system. In the Pacific Ocean, the identification of such a mode has led to successful predictions of El Niño; if the proposed Indian Ocean internal mode proves to be robust, there may be a similar potential for predictability of climate in the Indian Ocean region.