This study investigates the influence of the Indian Summer Monsoon (ISM) on the atmospheric circulation over the Arabian Peninsula (AP) using the European Centre for Medium Range Weather Forecasts’ twentieth century reanalysis (ERA-20C) for the period 1901–2010. After describing the summer climate of the AP using various dynamic and thermodynamic parameters, we investigate the link between extreme ISMs and atmospheric circulation over the AP on inter-annual time scale. Analysis of composites of different parameters during extreme monsoon (strong and weak) years reveals that the ISM plays an important role in the summer circulation over the AP and adjoining regions. The major noticeable changes in modulating circulation during extreme monsoons are: (1) a strengthening of lower tropospheric northerly winds, westerly winds passing through the Tokar Gap, Shamal winds, and the upper tropospheric easterly jet stream during strong ISM; (2) a northward (southward) shift of the subtropical westerly jet stream during strong (weak) monsoon years; (3) the development of strong upper level ridge above the surface thermal low during strong ISM years, which result in a baroclinic structure over the AP and adjoining regions; (4) an increase in adiabatic warming, and hence aridity, over the AP during strong monsoon years, caused by intense subsidence of the middle to upper troposphere due to zonal overturning circulation; and (5) convective instability during strong monsoon years caused by an intensification of the upward motion over the southern AP. Furthermore, during strong monsoons, the availability of excess moisture leads to atmospheric instability, which in turn triggers the formation of clouds that lead to more rainfall over the southwestern AP. Finally, the westward propagation of a Gill-type Rossby waves induced by the ISM play an important role in the variations of the AP summer climate by enhancing the warm core structure over the AP and through their interaction with the midlatitude westerlies during strong monsoons.