Understanding the variability of upper ocean thermal conditions is key to regional climate prediction. In recent decades, the sea surface temperature and upper ocean heat content in the South China Sea (SCS SST and SCS OHC) have exhibited contrasting changes. In-situ observations and reanalysis data reveal a linear warming trend in SCS SST during 1975–2010 but a regime shift of SCS OHC during the late 1990s. Mixed layer heat budget analysis shows that the decreasing latent heat flux associated with a weakening surface wind contributes to SCS SST warming trend. The increasing SCS SST reflects a regional footprint of global warming. A simplified upper layer budget diagnosis reveals that more than half of OHC change results from the advection effect, which is caused by an anomalous SCS anticyclonic gyre associated with an anomalous negative wind stress curl. Then, the anomalous anticyclonic circulation deepens thermocline depth at the basin-scale, and result in the regime shift of SCS OHC. Changes in the ocean circulation are found to be related to the enhanced trade wind and a Matsuno-Gill response to cooling in the tropical central Pacific. Further analyses show that the regime shift process is attributed to a phase transition of the Interdecadal Pacific Oscillation (IPO) from positive to negative. Our results indicate that although the IPO is the sea surface low-frequency climate pattern, it could impact on the subsurface thermal variability in the SCS through the oceanic process.